Beyond SpaceX: Uncovering High-Growth Small-Cap Opportunities in Space and Defense Tech

Amidst the fanfare surrounding SpaceX's ambitious endeavors in artificial intelligence and its recent significant financial maneuvers, a quieter, yet potentially lucrative, investment trend is taking shape. Savvy portfolio managers are directing their focus beyond the industry titans to a cohort of rapidly expanding, smaller companies that are poised to redefine the future of space and military technology. These enterprises, often operating beneath the mainstream radar, represent the next frontier for growth investors seeking exposure to the innovation revolutionizing critical global infrastructure.

Quick summary

• SpaceX made significant financial waves with a $60 billion acquisition of Cursor and an $85 billion initial public offering in mid-2025.
• A portfolio manager at Polen Capital, Drew Cupps, identifies Starlink as a key area of focus while also highlighting six promising, unnamed small-cap companies in space and military technology.
• Cupps, who took over the Polen 5Perspectives Small Growth Fund in June 2025, implemented immediate portfolio changes that led to a substantial 59.7% return for institutional shares in less than a year, significantly outperforming its benchmark.
• This investment strategy emphasizes identifying high-growth small-cap opportunities in cutting-edge defense and space sectors, often overlooked by broader market coverage.

Why it matters

The pursuit of innovative technologies in space and defense is no longer confined to government agencies or a handful of aerospace giants. This evolving landscape presents significant implications for investors, industry, and geopolitical stability. For investors, the identification of nimble, fast-growing small-cap companies in these sectors offers a potential avenue for outsized returns, especially as these firms develop niche capabilities critical to national security, global communication, and commercial space exploration. Their agility allows them to innovate and adapt faster than larger, more entrenched players, potentially leading to disruptive technologies that can capture significant market share.

For the industries involved, this shift signifies a decentralization of innovation. Smaller entities are driving advancements in areas like satellite communications, advanced materials, cybersecurity for critical infrastructure, and specialized defense systems. This fosters a more dynamic ecosystem, encouraging competition and accelerating technological progress. The rise of companies contributing to the 'new space' economy or developing dual-use technologies for both civilian and military applications underlines a broader trend of technological convergence.

Furthermore, the strategic importance of these sectors cannot be overstated. Dependable satellite networks are crucial for everything from global navigation and weather forecasting to disaster relief and national defense. Advanced military technology directly impacts global power balances and security. Investments in these areas, particularly in companies pushing technological boundaries, reinforce a nation's competitive edge and resilience in an increasingly complex world.

Background

The past year has underscored the escalating pace of innovation and investment in the technology sector, particularly in areas touching space and artificial intelligence. SpaceX, a private company, captured considerable attention in 2025 through a series of high-profile financial moves. These included the acquisition of AI firm Cursor for a reported $60 billion and an $85 billion initial public offering (IPO) on June 12, moves that firmly cemented its status as a behemoth in the tech and aerospace industries.

Concurrently, the broader investment community has been grappling with how to effectively capitalize on these rapidly evolving sectors. Drew Cupps, a seasoned portfolio manager with a 26-year track record in small-cap growth strategies, joined Polen Capital in Chicago on June 30, 2025. Taking the helm of the Polen 5Perspectives Small Growth Fund (PBSIX), Cupps immediately embarked on a significant overhaul of the fund's holdings. This strategic shift marked a departure from the fund's previous performance, which had seen a modest 6.8% return over the five years leading up to his appointment, significantly trailing the Russell 2000 Growth Index's 43% gain over the same period.

Cupps' mandate was clear: inject new life and a distinct investment philosophy into the fund. His approach, honed over nearly three decades and supported by an 18-year tenured analyst team, focuses on identifying high-conviction growth opportunities, specifically targeting the overlooked potential within space and military technology sectors. This strategic pivot, implemented swiftly upon his arrival, laid the groundwork for the fund's subsequent impressive performance, demonstrating a clear departure from its prior trajectory and reflecting a confident bet on the future of specialized tech. The immediate turnaround in performance underscores the impact of a focused, experienced investment team capable of identifying emerging trends ahead of the broader market.

Qnews24h insight

The spotlight on SpaceX's colossal valuations and strategic acquisitions, while merited, can sometimes overshadow the critical role played by smaller, specialized innovators. The insight here is that while large players like SpaceX (and its Starlink network) define the commercial frontiers of space and AI, the underlying technological bedrock is often constructed by a robust ecosystem of smaller, highly specialized firms. These companies are not merely suppliers; they are often the incubators of proprietary technologies, from advanced sensors and propulsion systems to sophisticated data processing and secure communications, that form the backbone of both defense and commercial space initiatives.

Drew Cupps' strategy exemplifies a sophisticated approach to growth investing: looking beyond the obvious market leaders to identify high-potential, yet less visible, companies. The significant turnaround of the Polen 5Perspectives Small Growth Fund in a relatively short period, driven by a complete portfolio transformation, suggests a validated thesis that substantial value resides in these specialized small-cap growth segments. However, investing in such niche, cutting-edge areas requires deep industry knowledge and a long-term perspective, given the inherent risks and longer development cycles associated with advanced technology. The challenge for investors lies in discerning which of these smaller players possess genuinely disruptive intellectual property and sustainable competitive advantages, as opposed to those merely riding the coattails of broader sector excitement. This approach prioritizes fundamental analysis and an intimate understanding of complex technological roadmaps over speculative trends, highlighting a maturation in how capital is deployed into the 'deep tech' frontier.

The Resurgence of Small-Cap Tech in Strategic Sectors

Historically, the defense and aerospace industries have been dominated by a few large prime contractors, often with long development cycles and significant government contracts. However, the landscape is shifting. The emergence of 'New Space' companies and the rapid advancement of dual-use technologies — innovations with both civilian and military applications — have created fertile ground for smaller, agile firms. These companies are often more responsive to technological shifts and capable of rapid prototyping, making them attractive partners for larger entities and direct beneficiaries of increased spending in both commercial and national security domains.

Cupps' focus on these six, albeit unnamed, smaller companies, alongside his keen interest in Starlink, points to a clear understanding of where future value generation lies. Starlink's success in providing global satellite internet connectivity showcases the immense commercial potential of space infrastructure. But to support and enhance such networks, a vast array of underlying technologies is needed, from ground-based receiving equipment and secure data processing units to advanced materials for satellite construction and sophisticated software for network management. These are precisely the areas where specialized small-cap companies can carve out significant market niches.

Investment Thesis: Growth Through Innovation

The investment thesis underpinning Cupps' strategy is rooted in the belief that true growth comes from fundamental innovation. In sectors like space and military technology, this often means investing in companies that are developing proprietary intellectual property, holding key patents, or possessing unique engineering capabilities. These firms might not have the massive revenue streams of a SpaceX today, but they hold the potential for exponential growth as their technologies become indispensable components of future systems.

For small-cap growth funds, this approach demands rigorous due diligence and a team capable of assessing complex technical and market landscapes. Cupps' emphasis on his team's 18 years of collective experience highlights the necessity of specialized expertise. Unlike broader tech investments that might focus on consumer trends or software-as-a-service models, investing in deep tech, especially in regulated and high-stakes sectors like defense, requires a nuanced understanding of procurement cycles, regulatory hurdles, and long-term technological roadmaps.

Risks and Rewards in a Volatile Landscape

While the potential rewards of investing in cutting-edge space and military technology can be substantial, the risks are equally pronounced. These sectors often involve high research and development costs, lengthy product cycles, and dependence on government contracts or a small number of large commercial clients. Technological obsolescence is another constant threat, as is the intense competition for talent and capital.

However, the rapid turnaround in the Polen fund's performance suggests that carefully selected small-cap companies in these fields can deliver impressive alpha. The key differentiator appears to be a disciplined approach to identifying companies with strong management, viable business models, and truly innovative, defensible technologies. This is not a market for casual investors but rather for those who, like Cupps and his team, possess a deep understanding of the underlying science, engineering, and market dynamics shaping the future of these critical industries.

The Broader Impact: Security, Connectivity, and Economic Growth

Beyond investment returns, the advancements made by these smaller tech firms have profound societal and economic implications. Innovations in satellite technology are expanding internet access to underserved regions, fostering economic growth and closing digital divides. Breakthroughs in military technology enhance national security capabilities, contributing to global stability. Furthermore, the commercialization of space, enabled by both large players and niche innovators, is opening up entirely new economic frontiers, from space tourism and resource extraction to advanced manufacturing in zero-gravity environments.

The ability of portfolio managers to identify and support these burgeoning companies ensures that capital flows into areas of critical innovation, driving progress that extends far beyond quarterly earnings reports. It signifies an era where investment decisions are increasingly tied to the advancement of fundamental technologies that will shape the world for decades to come.

Sources

• MarketWatch.com

FAQ

What is driving investor interest in space and military technology stocks?

Investor interest is driven by rapid technological advancements, the strategic importance of these sectors for national security and global connectivity, and the emergence of innovative smaller companies disrupting traditional markets. The 'New Space' economy and dual-use technologies (civilian and military applications) are creating new growth avenues.

Why are small-cap companies in these sectors particularly attractive to some investors?

Small-cap companies often possess greater agility, specialized technological expertise, and the potential for higher growth rates compared to larger, more established players. They can innovate quickly, develop niche solutions, and potentially gain significant market share in highly specialized segments of the space and defense industries.

Who is Drew Cupps and what is his investment strategy?

Drew Cupps is a portfolio manager at Polen Capital with 26 years of experience in small-cap growth strategies. He manages the Polen 5Perspectives Small Growth Fund and focuses on identifying high-growth small-cap companies at the cutting edge of space and military technology. His strategy involves making fundamental changes to portfolios based on deep industry knowledge to capitalize on overlooked opportunities.

Are the names of the six fast-growing stocks mentioned in the article?

No, while the article references a portfolio manager highlighting six promising smaller companies, their specific names are not disclosed in the provided source material.