Summary of Key Points
Recently, there has been a continuous sharp decline in U.S. space stocks (including individual companies and ETFs), as the investment boom driven by expectations of SpaceX's listing is beginning to cool down. The direct triggers were the explosion of a Blue Origin rocket and rumors about a reduction in SpaceX's IPO valuation. The deeper reasons lie in the excessive valuation bubble in this sector, the momentum-driven nature of these stocks, and the potential "liquidity-sucking effect" from large-scale IPOs like SpaceX's. There is widespread concern that the space industry has entered a phase where the bubble may be about to burst, and the wave of major IPOs could further strain market liquidity.
I. Direct Triggers for the Sharp Drop: Two Events That Doused Enthusiasm
The decline in space stocks was not accidental but was directly triggered by two unexpected events:
1. Blue Origin Rocket Explosion: On May 28th, Blue Origin's New Glenn rocket exploded during a static test, resulting in significant repairs to the $1 billion launch facility and possibly setting back the rocket's development by a year. This affected projects that relied on it, such as AST SpaceMobile's satellite launch plans, which will now be delayed. NASA's moon landing mission also became more dependent on SpaceX (although SpaceX's Starship is under investigation due to previous testing issues). Analysts immediately downgraded AST SpaceMobile's rating, leading to panic among investors and a rush to sell.
2. Rumors About SpaceX's Valuation Reduction: On May 29th, there were reports that SpaceX had lowered its IPO target valuation from $2 trillion to $1.8 trillion. Although Elon Musk denied these rumors, the market reacted with fear—could this mean that the space sector's valuations have reached their peak?
These two events effectively extinguished the enthusiasm generated by expectations of SpaceX's listing.
II. Deeper Reasons: The Valuation Bubble Has Burst
The sharp rise in space stocks had little fundamental support and was largely based on "future speculation":
- Exorbitant Price-to-Sales Ratios: The price-to-sales ratio (P/S ratio) is a simple measure of valuation; in normal industries, it ranges from a few times to several dozen times. However, for space stocks:
- AST SpaceMobile's P/S ratio is 260 times its expected sales for 2026 (meaning you're paying for 260 years of future sales ahead of time).
- Rocket Lab's ratio has risen from 20 times to 91 times.
- Redwire's ratio has increased from 3 times to 8.8 times.
- Even SpaceX's P/S ratio is 107 times, despite the company reporting a loss of $4.9 billion in 2025 (it had a profit of $790 million last year due to expansion and acquisitions related to AI).
Such high valuations are purely speculative.
- Analysts' Cautions: Jefferies downgraded Redwire from "Buy" to "Hold," and Deutsche Bank lowered AST SpaceMobile's rating, warning investors that these stock prices have significantly overestimated their future prospects.
III. The Nature of Space Stocks: Momentum-Driven "Rollercoaster" Investments
Space stocks are not value-driven but rather typical momentum stocks, meaning their prices are driven by market sentiment:
- High Technical Risks: The space industry is highly technical, and any issue with rocket launches or satellite deployments can lead to project delays and a collapse in valuation.
- Retail Investor Dominance: Stocks like Redwire, which rose 223% at the beginning of the year, attract many retail investors. However, any negative news can trigger a panic sell-off (for example, Rocket Lab's stock dropped 15%, and Redwire's stock fell 16% in one day).
IV. The "Liquidity-Sucking Effect" of Large IPOs
SpaceX's listing was initially seen as positive, but it could now have the opposite effect:
- Investors Shifting Funds: When SpaceX actually goes public, many investors may sell their existing space stocks to invest in it (given its industry leadership). This "liquidity draw" will exacerbate the decline in these already overvalued stocks.
- Fund Adjustments: Passive index funds that need to include SpaceX in their portfolios will have to reduce their holdings of other stocks, further squeezing market liquidity. Goldman Sachs data shows that before large IPOs, funds often increase their cash reserves and sell off existing positions.
V. Overall Market Signals: The Bull Market Is Under Stress
The space stock bubble is just a microcosm of the broader U.S. market bubble:
- **Bank of America's Warning About a "Post-Cycle Bubble": The current U.S. market exhibits several characteristics of a bubble, including high retail participation, low volatility, concentrated positions in AI companies, and a market dominated by a few firms.
- Goldman Sachs' Perspective on the Bull Market: AI trading is highly competitive, and technology stocks are approaching historical valuation levels. Combined with high U.S. Treasury yields and increased IPO activity, the bull market is facing significant challenges. If SpaceX lists at a valuation of $1.75 trillion, it would not only be a major event for commercial space but also a test of market liquidity.
Conclusion
The sharp decline in space stocks is a clear example of a bubble bursting driven by market sentiment. In the short term, the sector will continue to experience volatility. In the long run, only companies that can actually generate profits and maintain stable technology will survive. For ordinary investors considering participation, it's crucial to ask: Are you buying into "future dreams" or just a current bubble?