Investing in Space: Relativity CEO bets on bigger rockets, A.I. capabilities

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It's been a week since Starship lifted off from the Texas coast and exploded four minutes later in flight. While it didn't reach space, the most powerful rocket ever built marked a milestone and shined a light on a broader industry trend: building bigger rockets.

While there's nothing else quite like SpaceX's fully reusable mega system in development, other launch startups are adapting to a marketplace that's demanding more power and more capacity, more quickly. 

Take Relativity Space, a CNBC Disruptor 50 company valued at more than $4 billion, that has emerged as the posterchild of the trend. The space startup is already retiring its pioneering 3D-printed Terran 1 to focus exclusively on a new heavy-lift rocket called Terran R. While a powerful vehicle was always apparently part of the plan, Terran 1 – after seven years of development — flew for just the first time last month (reaching space but falling short of its intended orbit).

"Customers are telling us there just is not enough launch supply or launch capacity, period, in the world up to about 2027 or 2028," Tim Ellis, chief executive and co-founder of Relativity Space, told me in a recent interview for CNBC's "Manifest Space" podcast. "There's a giant launch shortage, and the only company that I think can actually fill it besides Relativity would be SpaceX. The problem is SpaceX is developing their own satellite constellation, Starlink, and so there's a bit of a conflict of interest.

"SpaceX is a really good option, but SpaceX is also going to compete against them as they launch their own payloads into space," Ellis added, suggesting Elon Musk's famously disruptive space company's launch dominance needs to be, well, disrupted.

But Relativity isn't alone in its bet to go bigger. Blue Origin has been developing its heavy-lift New Glenn rocket, which is now poised to fly for the first time next year, and Lockheed Martin-Boeing joint venture United Launch Alliance is hoping to launch its heavy-lift Vulcan Centuar sometime this summer after a recent explosion during testing delayed plans for early May. Even Rocket Lab is busy developing a more powerful rocket than its current small launch-focused Electron. The company's Neutron rocket will cater to the "medium-lift" market when it begins operating in 2024.

To be sure, Terran R isn't comparable to SpaceX's Starship or even Falcon Heavy. It's looking to compete most directly with SpaceX's workhorse Falcon 9. Targeting 2026 for first flight, the new Terran R will tout the ability to deliver up to 26 tons to low earth orbit in a reusable mode or 37 tons in an expendable one (meaning the first stage booster isn't recovered to be reused). By comparison, Falcon 9, with its reusable first stage, can transport just over 25 tons to low earth orbit. 
 
Ellis said Relativity already touts a $1.65 billion backlog with another several billion dollars' worth of active deal negotiations. He expects the customer mix to break down to between 80% and 90% commercial, with government contracts comprising the rest. 

Relativity has raised $1.3 billion to date from a list of investors that include BlackRock, Fidelity and Baillie Gifford, and plans to remain private for the time being. The company started its journey at Y Combinator, where Sam Altman was a direct partner and mentor to Ellis. 

Perhaps not surprisingly then, since Altman is the chief executive of ChatGPT-parent OpenAI, Ellis has been discussing regenerative A.I. with Altman and how its evolution could apply to Relativity's manufacturing process as it races to build its bigger rocket.

"3D-printing is really just a digital manufacturing technology that takes all of the human labor, all the complex parts … and puts them into a more software- and data-driven form, which A.I. actually can interface with a lot better," Ellis said in the "Manifest Space" interview. 

More powerful rockets and new manufacturing possibilities dovetail into an ambitious long-term vision: "We're focused on building the industrial base on Mars, so that's really the way that 3D-printing tech will eventually go … You need a factory that's lightweight, that can build a wide range of products with very little human involvement and labor," Ellis said.

"I do see that it's certainly possible and somebody needs to at least give it an honest try just make it happen. That's what we're here to do."

CNBC's weekly "Manifest Space" podcast focuses on the billionaires and brains behind the ever-expanding opportunities beyond our atmosphere.  Morgan Brennan holds conversations with the mega moguls, industry leaders and startups in today's satellite, space and defense industries. In "Manifest Space," sit back, relax and prepare for liftoff.

• AST SpaceMobile completes first satellite phone call: In a significant step forward in testing the company's network, AST SpaceMobile completed two-way voice calls via unmodified smartphones via its BlueWalker 3 test satellite. The first call was made from near the company's headquarters in Texas with a Samsung Galaxy phone. Engineers from telecommunications giants AT&T, Vodafone and Rakuten participated in the testing. – AST SpaceMobile
• Space in Q1 saw the lowest quarter of investment since 2015, according to Space Capital's latest report, at $2.2. billion during the period. The firm warned that the contraction, which is being felt globally across venture capital, has left many space companies "vulnerable to funding gaps," and sees "a sharp bifurcation between the winners and everyone else, as the market mania of the previous two years has fully subsided." – Space Capital
• Japanese ispace lunar landing falls short in final moments, with the company receiving flight data until the "very end" of the mission, CEO Takeshi Hakamada said. He added that ispace was proud of the attempt and the mission's overall achievements. It plans to launch its second cargo mission to the moon's surface soon. – CNBC
• U.S. Fish and Wildlife Service analyzes aftermath of SpaceX's Starship launch: While no dead wildlife or debris was found on refuge-owned lands, the rocket generated 385 acres of debris around the company's facility and started a 3.5-acre fire. The FAA, the primary regulator of SpaceX's Starship operations, grounded the rocket until the agency completes its mishap investigation, a standard practice for launch anomalies. – CNBC
• SpaceX leases SLC-6 launch pad in California: The Space Force announced it will hand over the Vandenberg facility to SpaceX, with the pad having been vacant since the final launch of ULA's Delta IV Heavy rocket last year. – Space Force
• Virgin Galactic completes glide flight, in preparation for VSS Unity's return to space: The glide flight is one of the final steps before attempting a VSS Unity spaceflight, which Virgin Galactic is still planning to conduct during the second quarter. – Virgin Galactic
• Astra's second annual "SpaceTech Day" features work on Rocket 4 vehicle, with the company's leadership continuing to emphasize a focus on reliability. The company also recently announced that Ursa Major will supply the upper stage engines for Rocket 4. – Astra
• NRO director highlights 'rapid investment' by China in testimony to House subcommittee, with Chris Scolese noting the spy satellite agency is continuing to "modernize" its fleet in orbit with a new constellation of "hundreds" over "the next few years." – NRO
• GAO calls for Space Force to review using companies' data for space situational awareness, with the office saying that the growing number of objects in space creates "challenges" the military needs to better mitigate. – Government Accountability Office
• LeoLabs is tracking a Chinese spaceplane, as well as other spacecraft of U.S adversaries, as the company further demonstrates its ability to show the location of objects in orbit. – SpaceNews

• Rocket engine maker Ursa Major reportedly adds $100 million, in a round that includes investors BlackRock and Space Capital. The company declined to comment on the fundraise. – TechCrunch
• Solid rocket builder X-Bow to receive $60 million through Air Force STRATFI program, as the startup aims to compete with major U.S. suppliers of the engines such as Aerojet Rocketdyne and Northrop Grumman. – SpaceNews
• Space Force is buying $59 million in SES capacity for communications services through the company's O3b mPOWER satellites. The deal will see SES use its constellation to help defense and security use cases of the U.S. and Luxembourg. – SpaceNews
• Astroscale raises $44 million in debt from MUFG and Mizuho, as it plans to further extend its business operations. The company has raised about $106 million through loans to date. – Astroscale
• Climate-monitoring startup Hydrosat raises $20 million to launch its first two thermal infrared satellites, with the company looking to delve into a key sector of the Earth observation market. – TechCrunch
• Astra wins $11.5 million Space Force contract for 2025, to launch the STP-S29B mission on its Rocket 4, carrying scientific experiments and tech demonstrations. – Space Force
• Astrobotic buys Falcon Heavy launch for third lunar mission: The company bought the mission from SpaceX for a launch in 2026, to deliver an Astrobotic lander to the Moon's south pole. The deal's value was not disclosed. – Astrobotic
• Apex orders five spacecraft engines from Astra, for delivery later this year. Astra will provide "Spacecraft Propulsion Kits," which includes the thruster, power, feed system and tank, and will install them on its Aries satellite bus. The value of the contract was not disclosed. – Astra
• Terran Orbital received milestone payment from Rivada for an undisclosed amount under the company's $2.4 billion deal to build and operate 300 communications satellites. – Terran Orbital

• Boeing reports Q1 results for Defense, Space & Security unit, which saw revenue grow 19% year over year to $6.5 billion, but the company focused solely on the former of those three areas in its release and presentation, with no printed updates on its space business. The unit's operating margin loss decreased significantly year over year, from a 16.9% loss to a 3.2% loss. – Boeing
• Northrop Grumman's space unit saw sales increase 17% in Q1, increasing to $3.4 billion from $2.9 billion in the same period a year earlier, primarily from its missile programs. It also saw increases in sales from satellite programs including NextGen Polar and the SDA Tracking Layer. – Northrop Grumman

• Apr. 27: SpaceX's Falcon Heavy launches Viasat and Astranis satellites from Florida.
• Apr. 28: SpaceX's Falcon 9 launches SES' O3b mPOWER satellites from Florida.
• Apr. 30: Rocket Lab's Electron launches NASA TROPICS satellites from New Zealand.