A Turning Point for the ARK Space ETF?

As 2025 draws to a close, the ARK Space Exploration & Innovation ETF (ARKX) appears to be approaching a potential inflection point. A difficult November has given way to December optimism, fueled by substantial contract awards from the U.S. Space Force that could signal a near-term reversal. The fund's recent behavior highlights a clear market divergence: pure-play space infrastructure equities are surging, while technology-focused holdings continue to weigh on overall performance.

In a mid-December portfolio adjustment, ARK Invest divested a portion of its stake in Iridium Communications. Market observers suggest this move may represent a capital rotation into higher-conviction, more heavily weighted positions within the fund.

The contrasting dynamics within the ETF are stark. The innovative, but volatile, segment of the portfolio remains a headwind. Shares of Archer Aviation declined by approximately 10% in November, reflecting ongoing turbulence in the urban air mobility sector. Similarly, AMD, a top innovation holding for the fund, saw its value drop 15% during the same period, exerting significant downward pressure on the fund's net asset value (NAV).

Government Contracts Fuel the Rally

The current December rally is being driven almost single-handedly by space infrastructure stocks, many of which are benefiting directly from major government awards.

Should investors sell immediately? Or is it worth buying ARK Space Exploration & Innovation ETF?

Rocket Lab USA has solidified its role as a cornerstone holding. On December 19, the company secured an $816 million contract from the Space Development Agency (SDA) for 18 satellites. This news propelled the stock upward by 17.7% to a record high. Rocket Lab's total contract volume for SDA projects now exceeds $1.3 billion.

Another key beneficiary is L3Harris Technologies, a firm ARK Invest accumulated heavily in the summer of 2025. The defense contractor received the largest single award in the recent SDA tender round, a contract valued at $843 million. Its presence in the portfolio acts as a stabilizing "defense giant" alongside more speculative names.

Kratos Defense & Security Solutions is also in the spotlight. On December 22, investment bank KeyBanc initiated coverage on the stock with an "Overweight" rating, citing the company's involvement in high-growth areas like hypersonics and drone technology.

Whether the strength in these infrastructure names is sufficient to establish a durable trend reversal for the ARK Space ETF will be a key question for investors as the new year begins.