Microsoft (MSFT) Unveils Space Ambitions

Microsoft Corporation (MSFT) has shared more details about its Azure space program and the latest strategic partnerships this week, providing greater insight into how the company plans to compete against Amazon.com, Inc.'s (AMZN) Amazon Web Services (AWS) and Alphabet Inc.'s (GOOG) Google Cloud for cloud computing market dominance.

As private and public companies are playing an increasingly prominent role in space exploration alongside governments, the race to provide cloud computing services to these emerging space players is also heating up.

"At Microsoft, we intend to make Azure the platform and ecosystem of choice for the mission needs of the space community by harnessing the power of Azure," said Tom Keane, Azure Global & Industry Solutions corporate vice president.

Microsoft's Azure Space new offerings, which offer cloud computing solutions "on and off the planet," will also allow it to compete with Google Cloud and AWS, with Amazon's service holding the largest chunk of the $34.6 billion cloud computing market, according to Canalys research.

On Oct. 20, Microsoft announced partnerships with SpaceX and SES S.A. (SGBAF), a European satellite company. Microsoft's other space exploration partners include AMERGINT Technologies, Kratos Defense & Security Solutions, Inc. (KTOS), Kongsberg Satellite Services (KSAT), KubOS, US Electrodynamics, and Viasat, Inc. (VSAT).

Microsoft has approached SpaceX, and the two companies have been "working over the last few months together to figure out how this can work," said Gwynne Shotwell, SpaceX president and chief of operating officer, in their joint video announcement.

The broad-ranging collaboration between Microsoft and SpaceX is focused on bringing the "power of Starlink connectivity to the Azure infrastructure." It includes public and private sector clients, SpaceX's Starlink satellite network, and Azure's Modular Datacenter (MDC), as well as integration of Azure's Edge devices and network with Starlink. Microsoft's newly announced MDC is meant "for customers who need cloud computing capabilities in hybrid or challenging environments, including remote areas," according to Microsoft.

"Basically, you have a center, a capability you put anywhere on Earth, you need to get that data somewhere else. Having a satellite-based system, you can get there without fiber, you don't need fiber," Shotwell explained. "You talk to the satellites that we have in orbit, the satellites will talk to each other and get that data to another point on Earth where it's needed."

SpaceX will also use Microsoft Azure's orbital emulator, which can run "massive satellite constellation simulations with software and hardware in the loop" allowing "developers to evaluate and train AI algorithms and satellite networking before ever launching a single satellite," according to Microsoft's announcement.

There are clear synergies, as both companies have track records and experience working with the U.S. government entities. Microsoft will also work with SpaceX as a subcontractor on a project awarded by the Space Development Agency to deliver new satellites for the Space Tracking Layer defense system to track ballistic, cruise, and hypersonic missiles. Microsoft is also keen to pursue satellite connectivity and capability opportunities in the private sector, including the agriculture, telecom, and energy sectors.

Microsoft's competitors are not standing by idly. AWS has also been broadening its space capabilities this year through partnerships with Capella Space and Maxar Technologies Inc. (MAXR), which claims to deliver weather forecasts 58% faster than the supercomputer operated by the National Oceanic and Atmospheric Administration (NOAA). Capella's Earth Observation solutions leverage AWS' "compute, storage, database, machine learning, and analytics services to process this data" across a range of industries and applications.

Tech Space Race

While private companies have been largely driving the latest wave of space exploration technology, a handful of public companies emerged recently including Virgin Galactic Holdings, Inc. (SPCE) and Aerojet Rocketdyne Holdings, Inc. (AJRD).

According to research from Bank of America, there are only 14 publicly traded stocks with space exposure. However, Bank of America analyst Ron Epstein projects that there will be "more to come."

In the meantime, the tech space race is heating up and is offering more opportunities for investors who see growth in the cloud computing market and tech companies with increasing space exploration exposure but are too jittery about pure-play space stocks.