A weeks-long rally in space stocks suddenly came to a screeching halt on Friday.The explosion of the Blue Origin heavy-lift launch vehicle reminded investors that although this booming industry is full of imaginations of wealth, it is also accompanied by huge risks.
A Blue Origin rocket exploded during a static ignition test, and a huge fireball rose from the site
Blue Origin's New Glenn heavy-lift rocket exploded during an engine ignition test in Florida on Thursday, causing no casualties. The company later confirmed that an "unusual situation" occurred during the rocket test that day, and founder Jeff Bezos posted that "today is a really bad day."
The rocket was originally planned to deploy satellites for Amazon's "Low Orbit Satellite Program" (Leo) in the future, which was seen as a competitive solution to SpaceX's "Starlink".
The explosion dealt a major blow to Blue Origin and is likely to lead to project delays. At the same time, the outside world has begun to question the reliability of this rocket platform - just this week, NASA has just selected the company to participate in the lunar base plan.
For investors, the accident also punctured the recent frenzy surrounding the space industry. As SpaceX's IPO approaches, the market has been enthusiastic about the space sector.
Blue Origin is also responsible for launching communications satellites for AST SpaceMobile, and this recently hot stock also plummeted after the rocket explosion.
Steve Sosnick, chief strategist at Interactive Brokers, said: "Blue Origin's failure is an unfortunate reminder to the market that the space industry is full of risks, and even small problems can have catastrophic consequences."
“Previously, traders and investors had almost only focused on the industry’s potential returns, and this lesson is like pouring cold water on a sector that was already very hot, even overheated.”
As of Friday, AST SpaceMobile, which has surged this year, once fell 21%, the largest intraday drop since 2024; space infrastructure company Redwire once fell 16%; rocket launch company Rocket Lab fell as much as 9.4%; aerospace and defense manufacturer Karman Holdings once fell 13.4%.
The basket of U.S. space industry-related companies compiled by Bank of America once fell 7.7%, and the space-themed ETF-Procure Space ETF (code: UFO) also fell by more than 8%. Space and defense contractor Voyager Technologies fell as much as 12%, and lunar exploration company Intuitive Machines fell as much as 15%.
Industry research analyst John Butler pointed out that the explosion may jeopardize AST SpaceMobile's satellite deployment schedule, because the "New Glenn" rocket will most likely suspend flight for investigation to find out the cause of the accident.
He wrote in the report: "After a similar accident occurred with SpaceX's Starship last year, the original flight plan was forced to be postponed for nearly two months. If the follow-up investigation takes a long time, AST SpaceMobile is likely to have a project delay."
Deutsche Bank analyst Bryan Kraft downgraded AST SpaceMobile from "buy" to "hold." He believes that this accident will significantly slow down Blue Origin’s launch schedule, and if it loses Blue Origin support, AST will not be able to achieve its 2026 launch goal.
Eric Diton, president and managing director of The Wealth Alliance, said that such space concept stocks are essentially "momentum stocks" with extremely high valuations and are based more on future profit expectations, so the fluctuations are also extremely violent, especially when the time for profit realization is delayed.
“When a setback like this occurs and future launch times and profitability times may be extended, many momentum investors tend to sell first and then slowly study what happened.”