Space Exploration vs. Defense Dominance: ARKX or XAR? Your ETF Comparison Guide

Space tourism headlines and record military budgets are propelling very different corners of the aerospace universe. If you’re torn between betting on the next satellite constellation with ARK Space Exploration & Innovation ETF (ARKX) or the companies building the hardware that keeps air-space secure with SPDR S&P Aerospace & Defense ETF (XAR), understanding how each fund is built can keep your portfolio from drifting off-course.

Holdings, Flows & Growth Drivers

Concentration vs. diversification.

ARKX is an actively managed “space pure-play” with just 32 positions; its top five, Rocket Lab (RKLB), Kratos (KTOS), Iridium (IRDM), AeroVironment (AVAV) and Archer Aviation (ACHR)—soak up two-thirds of assets, giving every launch failure or contract win an outsized impact. XAR, by contrast, tracks an equal-weight S&P index with 41 names, spreading risk across traditional primes, Huntington Ingalls (HII), Textron (TXT) and nimble drone makers—yet no single stock tops 5% of the fund.

Cost and construction.

The price of that concentrated, manager-driven approach is ARKX’s 0.75% expense ratio, more than double XAR’s à-la-carte 0.35%. Active stock-picking also means ARKX can pivot quickly toward emerging niches like space-based broadband, while XAR’s rules-based basket offers steady exposure to the full defense complex.

Money flows tell the mood.

Investors have voted with their wallets: XAR has gathered roughly $444 million over the past year, while ARKX has leaked about $10.5 million. That divergence helps explain why XAR’s asset base now tops $3.6 billion versus ARKX’s $357 million.

Performance snapshot.

Even with heavier inflows, XAR hasn’t lost its edge—up 29.48 % year-to-date and 49.42 % over 12 months. ARKX has delivered a respectable 31.05 % YTD and 64.5 % over the same period, reflecting how a few soaring small-caps can turbo-charge returns when the space theme is in favor.

What could keep the engines firing?

Pent-up global defense demand—highlighted by the U.S. “Golden Dome” missile-defense push and NATO’s higher spending targets—extends the runway for XAR’s holdings. Meanwhile, the same defense cash is spilling into commercial space start-ups, sustaining the venture pipeline that feeds ARKX’s future universe.

Related ETFs

ITA – iShares U.S. Aerospace & Defense: Cap-weighted giant that tilts toward legacy primes like Lockheed Martin and Boeing.

PPA – Invesco Aerospace & Defense: Tracks the SPADE Defense Index, balancing big primes with electronics and homeland-security plays.

UFO – Procure Space ETF: Passive space index tracking satellite operators and ground-equipment suppliers worldwide.

ROKT – SPDR S&P Kensho Final Frontiers: Targets companies advancing deep-space (and deep-sea) exploration tech—an edgier cousin to ARKX.

Bottom Line:

Choose ARKX if you’re hunting for early-stage space winners, can tolerate higher fees and volatility, and believe the commercialization of orbit is still in the second inning. Opt for XAR if you want broad, equal-weighted exposure to a defense sector enjoying multi-year budget tailwinds, backed by strong inflows and a lower price tag. Either way, the aerospace story is no longer science fiction—it’s a live market battleground, and the right ETF lets you pick the side that matches your risk appetite.

Fire up our ETF Compare Tool to reveal whether space exploration or defense dominance wins for your portfolio.