Invesco (PPA) vs Tema (NASA): Which Aerospace and Space ETF Is the Better Buy?

Invesco Aerospace & Defense ETF (PPA) has a lower 0.58% expense ratio versus Tema Space Innovators ETF (NASA) at 0.75%, with $8.4 billion in AUM versus $2.6 billion for NASA. PPA offers broader, more established defense exposure, a 0.37% dividend yield, and a five-year beta of 0.87, while NASA is a newer, more volatile space-themed fund launched in 2026. The article is primarily a comparative ETF review and is unlikely to move prices materially.

Analysis

PPA is the cleaner expression of the current defense bid because it monetizes the re-rating of cash-generative primes while avoiding the valuation and execution risk embedded in early-stage space operators. The second-order effect is that capital flowing into defense ETFs tends to reinforce a “quality at any price” regime in industrials, where large contractors can fund buybacks and program execution with less dependence on external capital than the space cohort.

NASA is more of a sentiment instrument than a fundamental allocator today: it packages high-beta space names whose upside is driven by milestone cadence, contract wins, and financing conditions rather than near-term earnings power. That makes it highly sensitive to rates and liquidity; if real yields stay elevated, the market will keep discounting long-duration revenue streams and the basket can underperform even if space-specific headlines remain positive. Conversely, any easing in rates would disproportionately help NASA relative to PPA because its constituents have more of their value pushed into later years.

The contrarian miss is that PPA’s “boring” profile may actually be the better asymmetric trade over the next 6-12 months if geopolitics stays sticky: defense budget visibility plus dividends create a floor, while NASA still needs the market to pay up for optionality. The more interesting relative-value angle is not long-only aerospace, but long cash-flow defense vs short the funding-sensitive space complex, since the latter’s equity issuance risk and capex intensity can compress returns even in a favorable narrative environment. For single-name spillovers, GE and RTX look like the highest-quality proxies for stable defense exposure, while ASTS remains the most fragile to any de-risking in growth multiples.

Key Decisions for Investors

• Long PPA / short NASA as a 3-6 month relative-value pair; thesis is lower funding risk, better cash conversion, and less duration sensitivity. Target 8-12% spread capture; stop if real yields break meaningfully lower and growth multiples re-rate.
• Initiate tactical long RTX and GE on weakness over the next 1-2 months as the higher-quality defense/industrial beneficiaries inside the basket; expect lower drawdown than the broader aerospace theme with upside tied to budget stability and buyback support.
• Avoid chasing ASTS at current momentum levels; if owning, use call spreads rather than stock for 6-9 month exposure because the name is most vulnerable to any risk-off move in unprofitable growth.
• If rates soften, rotate part of PPA exposure into NASA only on a measured basis via staged entries over 4-8 weeks; this is a convexity trade, not a core holding, and should be sized small relative to portfolio risk.
• For defensive hedging, pair a modest short in a space-beta basket against long defense exposure to isolate capital-markets risk from geopolitics; the trade should work best if equity issuance windows remain tight.