BY THE NUMBERS

Space Force did not just buy satellites. It bought a new sensing architecture.

On May 29, Space Systems Command awarded SpaceX a $4.16 billion agreement to begin fielding the Space-Based Airborne Moving Target Indicator program. The architecture combines space-based sensors — including high-band radar — secure communications, and resilient ground processing, with an initial constellation targeted for 2028.

Federal procurement records reported by MarketWatch show $2.637 billion currently obligated and a maximum program ceiling of up to $9.34 billion. That ceiling is not committed revenue. It is the outer boundary of what this contract vehicle could eventually authorize if every option is exercised over its five-year life.

The nominal contracts awarded to Rocket Lab, Lockheed Martin, L3Harris, Northrop Grumman, and the remaining five vendors — $10,000 or $6,666 each — are not program wins. They are access tickets. The Space Force said explicitly it "anticipates issuing multiple awards in the coming year." The follow-on task orders are where the economics actually live.

The deeper story is not the contract size. It is the structural shift: part of the airborne-surveillance mission — the job of watching the sky for missiles, drones, and other airborne threats — is moving from expensive, vulnerable aircraft into a persistent orbital sensing layer. The architecture converges space-based radar, secure data transport, and AI-enabled ground processing into a single network. That network has a different economics than the hardware platforms it partially replaces. And different economics produce different winners.

THE CONVERGENCE TRADE: THREE LAYERS, ONE THESIS

To understand what the SB-AMTI award means for investors, you need to think in layers. The program has three distinct technical layers, and each layer maps to a different part of the capital markets.

Layer One is the orbital infrastructure — the satellites, the launch vehicles, and the secure data transport layer. This is SpaceX's domain, and Rocket Lab's adjacency. The economics here favor high-cadence launch providers who can also manufacture satellite buses at scale. SpaceX's constellation manufacturing and launch cadence have no peer competitor in the U.S. market. Rocket Lab, now a Nasdaq-100 member, has built end-to-end capability: launch, satellite buses (Photon), solar power (SolAero), and — following the April 14 acquisition of Mynaric — laser optical communications terminals. That is a vertically integrated space-systems prime, not a launch company.

Layer Two is the sensor and payload stack — the radar, electro-optical, and infrared payloads that do the actual tracking. This is where the legacy primes — L3Harris, Northrop, Lockheed — have genuine moats. Their ISR payload expertise is deep, classified, and built over decades. The risk is not competence; it is that SB-AMTI's software-defined architecture rewards iteration speed as much as sensor pedigree. Whether the legacy primes can deliver both remains unproven in this program context. Their specific SB-AMTI roles have not been publicly disclosed.

Layer Three is the AI processing and decision layer — and this is where the convergence trade gets genuinely interesting. A satellite constellation ingesting continuous global airspace data generates a petabyte-class firehose. Making that data actionable in seconds — identifying threat type, trajectory, launch point, and engagement window — is an AI inference problem. Palantir's Maven Smart System is already the DoD's primary ISR data-processing platform and is the most credible candidate for the ground-processing layer. No SB-AMTI award to Palantir has been disclosed, but the architectural fit is direct.

"SB-AMTI does not prove that pilots are being replaced. It proves that persistent sensing, secure transport, and AI processing are converging into a new defense architecture."

THE BOTTLENECK MIGRATION: FROM COMPUTE TO KILL CHAIN

Regular readers will recognize the Bottleneck Migration thesis: AI infrastructure constraints rotate sequentially, and investment opportunity lies in identifying the current binding constraint before the market prices it in.

We have tracked this rotation from compute (GPU scarcity, 2022–2024) to memory (HBM3E, CoWoS packaging, 2024–2025) to networking and power delivery (2025–2026). The SB-AMTI program suggests the next rotation is already beginning: the binding constraint in AI-enabled military operations is not inference horsepower on the ground. It is the sensing layer that feeds the inference engine.

A constellation of LEO satellites with resilient data transport is, in investment terms, the world's most expensive sensor network. And like every sensor network before it, the tollbooth economics belong to whoever owns the infrastructure layer — not whoever owns the data it generates.

SpaceX owns the launch and constellation prime position. Rocket Lab is the only publicly traded vendor with end-to-end optionality across launch, satellite buses, and now laser-comms terminals. The follow-on task order pipeline is the catalyst to watch.

THE TRANSPORT LAYER: OPTICAL CROSSLINKS AND WHAT THEY ACTUALLY DO

SB-AMTI's data transport architecture has not been fully disclosed. But the program's stated goal — delivering tracking data from orbital sensors directly to warfighters with low latency and high resilience — points toward optical inter-satellite links as a likely transport layer.

Traditional ISR satellite constellations relay data through ground stations, which introduces latency, geographic gaps in denied-access regions, and radio-frequency vulnerability. Optical crosslinks reduce dependence on ground relays and make high-volume data transport significantly harder to intercept or jam. They are not a complete solution: pointing and acquisition, terminal yield, weather effects on ground-segment optical links, and counterspace risk remain real engineering challenges. But the directional shift toward optical transport is well-established across multiple DoD space programs.

SpaceX builds its own inter-satellite laser terminals in-house — a structural moat. Rocket Lab, through its April 2026 acquisition of Mynaric, now holds the laser-terminal capability that was previously the investment thesis for a separate publicly traded company. That acquisition collapsed what was a two-company optionality trade into a single ticker.

WINNERS, PRESSURE POINTS & POSITIONING

Note: Vendor-pool inclusion confirmed via GSA procurement records. Specific program roles for Tier 2 vendors have not been publicly disclosed. Tier 3 companies have no disclosed SB-AMTI awards — inclusion reflects thematic adjacency only.

PRESSURE POINTS

CREDIBILITY FIREWALL

BEAR CASE

FIVE TAKEAWAYS

1. The SB-AMTI program is not a defense procurement story. It is a structural re-architecture of part of the airborne-surveillance mission — from vulnerable aircraft into a persistent orbital sensor-and-software network. Software-defined sensing networks have different economic winners than the hardware platforms they complement.

2. SpaceX is the dominant commercial beneficiary with the only substantial disclosed award — and it is now publicly traded (SPCX, Nasdaq, June 12). Rocket Lab is the highest-quality vendor-pool optionality play: the only other publicly traded end-to-end space-systems provider in the pool, now including laser-comms terminals through the Mynaric acquisition. The $816M existing Space Force contract is the proof point that Rocket Lab's defense-prime transition is already underway.

3. The AI inference layer — Palantir's Maven Smart System in particular — is quietly becoming the operating system of the U.S. military's sensor-to-shooter loop. No SB-AMTI task order has been disclosed to Palantir. But the architectural fit between Maven's ISR data-processing capability and SB-AMTI's sensing output is direct. Watch the follow-on RFP language for ground-processing requirements.

4. Rocket Lab's acquisition of Mynaric (completed April 14) collapsed what was a two-company laser-terminal trade into a single ticker. Investors who were tracking Mynaric as a separate optical-comms play now need to re-underwrite the thesis through RKLB's full vertical integration story — which is actually a stronger investment case.

5. The Bottleneck Migration thesis now extends into the defense domain: the binding constraint in AI-enabled military operations is not ground-based inference capacity. It is the orbital sensing layer that feeds the inference engine. The vendor pool has been opened. The follow-on task orders are the catalyst. Investors who get there before the defense ETFs re-price the new-space tier will own the tollbooth, not the traffic.

Many of today’s data centers are still using copper wiring. The same metal we’ve been using for a hundred years.

At the speeds AI demands with data moving between thousands of GPUs, billions of times a second, copper doesn’t just slow down.

It turns that data into heat. The more you push through it, the worse it gets. There’s no software for fix for that.

So what’s the answer?

Explore the Photonics Layer…..

The news. Two things matter: PCE and memory. May PCE printed 4.1% headline, the first 4% handle in three years, with core at 3.4%, the highest since October 2023. Core rose 0.3% month-over-month for the third straight month.

Oil can help future headline inflation; it did not fix this print, and it does not solve services, technology goods or the cost of building AI infrastructure. Warsh said the Fed will “deliver price stability” and that the message has been missed “for five years.” Markets now see roughly 80% odds of a September hike. That is the Fed test.

The memory test was Micron: $41.46 billion of revenue, $25.11 of adjusted EPS, $50 billion of Q4 revenue guidance, and a CEO saying he has no line of sight to when supply catches demand. The underreported part is the contract structure. Micron has 16 strategic customer agreements, 14 of which represent roughly $100 billion of cumulative revenue at minimum prices. The largest deals cap existing-product prices near current levels, but include floors and allow premiums on future products. Translation: Micron is giving up some spot-price upside in exchange for contracted scarcity. That is not the old memory cycle. That is a strategic supply market.

Of course after yesterday’s memory rally, we are now seeing a selloff.

Interesting that while memory ramped yesterday, the Mag 7 got crushed, and actually looks like a textbook short…..

The noise. Asia is being framed as proof the memory trade is cracking. Too broad. Tuesday’s KOSPI collapse was an overheated market with leverage, single-stock ETFs, foreign selling and regulators finally yelling “enough.”

Today’s selloff is a different but related problem: investors are questioning AI valuations and memory-margin sustainability after Apple raised Mac and iPad prices and Xbox said storage and memory costs are already up more than 2.5x. OpenAI potentially waiting until 2027 to go public rather than accepting a lower valuation hit SoftBank and the whole AI complex. That is not the same thing as HBM demand disappearing. Consumer-device elasticity is real. Data-center memory scarcity is also real. The signal is margin durability and positioning. The noise is “AI bubble burst.”

Same with Hormuz. Oil is down because stranded barrels are moving again and Aramco resumed Ras Tanura loadings. But overall traffic remains a fraction of the prewar 125 ships per day, a cargo vessel was hit near Oman, the IMO paused its evacuation plan, and the IAEA/Iran inspection dispute is still live. Reopened is not resolved.

When capital chases a tech theme, it tends to pile into the most obvious
layer and miss the one underneath. AI spending is now bumping hard
against memory. Hyperscalers — the big cloud builders like Amazon,
Google, and Microsoft — have shifted memory from 8% of their build
budgets to an estimated 30% in a single cycle. That capital has to go
somewhere. If the constraint is memory, and the build can't move without
it, shouldn't an investor own the layer AI runs on?

View HBMX fund holdings →

Distributor: Foreside Fund Services | Investing involves risk including
possible loss of principal.

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$AVEX ( ▲ 5.74% )

AEVEX is the cleaner way to play the drone war than chasing every “AI defense” headline. The company came public in April at $20, then sold another 5.7 million primary shares at $27 in June; today the stock is around $15–16, below both raises, even though the business just printed $216.7 million of Q1 revenue, up 307%, turned a $27.3 million loss into $21 million of net income, and guided to $600–$620 million of 2026 revenue with $88–$94.5 million of adjusted EBITDA. That is the setup: the stock looks busted, but the operating data does not. AEVEX is not selling PowerPoint autonomy. It has delivered or committed more than 10,200 autonomous systems, its products are already in operational use, and its portfolio sits directly in the part of defense budgets that matters now: affordable unmanned systems, one-way attack drones, ISR, electronic warfare and AI-enabled mission software. The risk is obvious: funded backlog fell from $503 million to $356.6 million in Q1 as the EUCOM Deep Strike program converted to revenue, 73.9% of backlog is tied to the U.S. government, and this is still a newly public, private-equity-backed name with selling-shareholder overhang. But that is also why it is interesting. The market is treating AVEX like a failed IPO. The numbers look more like a real defense prime being repriced during its first public stumble. The question is whether Q1 was a program-driven spike or the beginning of a durable drone production ramp. That is why I’m watching it.

Great conversation on wide ranging topics with Kenny Polcari…

The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.

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