Commercial Space Stocks Are Crashing: Here’s Why Investors Got It Wrong

• Average Sector P/E Ratio: 96x
• Peak Company P/E Ratio: 1,000x+
• Benchmark S&P 500 P/E: 18-20x
• Profitability Status: Most companies in R&D/pre-profit stage
• Primary Growth Driver: Government policy and strategic cluster designation

The commercial space sector in China just experienced a wild ride.

Since early 2026, space exploration stocks have soared, then nosedived just as fast.

The reason? A perfect storm of hype, valuation bubbles, and regulatory crackdowns.

But here’s the thing: the long-term opportunity in commercial space is still real.

The trick is knowing the difference between speculative fever and genuine technological progress.

The Explosive Rally: Why Commercial Space Stocks Went Parabolic

Let’s start with the “why it went up” part of the story.

The commercial space industry (shangye hangtian 商业航天) has hit several inflection points that legitimately capture investor attention:

• Reusable rocket technology is finally becoming real—companies like Zhuque-3 (Zhuque sanhao 朱雀三号) and Long March 12A (Changzheng shier hao jia 长征十二号甲) are actively competing in testing phases
• Satellite internet has escaped the lab and entered everyday life—some mobile phones now have actual satellite calling features
• Cost structures are improving dramatically, making space tech more accessible than ever before

Then came the policy tailwind.

China’s 15th Five-Year Plan explicitly named aerospace as a strategic emerging industry cluster.

The China National Space Administration (Guojia Hangtian Ju 国家航天局) created an entire Commercial Space Department and opened up scientific research projects and testing facilities to private companies.

Regional governments started throwing money at the problem—creating industrial funds and rolling out special policies to build out the entire commercial space supply chain.

From an investor’s perspective, this looked like a green light.

And when you combine genuine technological progress + government backing + massive market potential, capital floods in.

That’s exactly what happened.

The Valuation Trap: When P/E Ratios Become Jokes

Here’s where things got weird.

Before the crash, the average price-to-earnings ratio (P/E) for commercial space stocks hit 96 times.

Let that sink in.

But it got worse—some leading companies were trading at P/E ratios exceeding 1,000 times.

To put this in perspective: the average S&P 500 company trades around 18-20x earnings. A P/E of 1,000x means investors are betting on decades of perfect execution with zero margin for error.

The fundamental problem?

Many companies in this space aren’t profitable yet.

They’re still in pure R&D mode—”R&D without profit” is how regulators described it.

When your valuation completely detaches from actual earnings or commercial traction, you’ve got a bubble on your hands.

Speculative capital poured in, chasing the hype rather than the fundamentals.

This amplified the swings in both directions.

The Regulatory Hammer: When Disclosure Standards Matter

Things really unraveled when regulators decided to take action.

The Shanghai Stock Exchange (Shanghai Zhengquan Jiaoyisuo 上海证券交易所) issued enforcement notices to several commercial space companies.

Their findings were damning:

• Information disclosures about commercial space operations were inaccurate
• Disclosures were incomplete—missing crucial details investors needed
• Risk warnings were insufficient—companies weren’t being upfront about downside scenarios

In other words: companies were overselling their progress and downplaying their risks.

Once the market realized the information they’d been given wasn’t trustworthy, the selling started.

Institutions that had been propping up prices started exiting.

Shareholders divested.

Without fresh capital support, prices underwent a major correction.

The stock market punishes broken trust faster than almost anything else.

The Real Long-Term Play: Separating Signal from Noise

Here’s what’s important to understand: the underlying industry fundamentals haven’t changed.

Policy support is still in place.

Technological breakthroughs are still happening.

Market demand is still real.

These are the factors that actually matter for long-term value creation.

But in the short to medium term, commercial space faces legitimate challenges:

• Application scenarios need to expand—satellite internet is cool, but what else can you actually do with this technology at scale?
• Costs need to come down further—reusable rockets are great, but they need to reach price points that make economic sense for diverse customers
• Technical maturity takes time—you can’t rush physics or engineering. This industry needs long-term cultivation, not overnight wins

The companies that survive this downturn will be the ones with genuine core technologies and real commercial traction.

The ones built purely on conceptual hype? They’ll get filtered out.

That’s actually healthy for the ecosystem.

What Investors Should Actually Do Now

If you’re thinking about the commercial space sector, here’s the playbook:

• Abandon the speculative mentality.
  Stop trying to catch falling knives or chase momentum.
  This isn’t a trade—it’s a position.
• Focus on fundamentals.
  What actual technology does this company own?
  Do they have real customers?
  Is there a path to profitability, or just a pile of R&D spending?
• Monitor technological progress closely.
  Track which companies are hitting engineering milestones.
  Watch for reusable rocket tests, satellite deployment announcements, and commercial contracts.
• Check information quality.
  In light of the Shanghai Stock Exchange warnings, be extra skeptical of promotional claims.
  Read the fine print.
  Look at what companies aren’t saying.
• Embrace a long-term horizon.
  This isn’t a sector where you’ll see exponential returns in 12 months.
  If you can’t commit to holding for 5+ years, this probably isn’t for you.

Patience separates rational investors from momentum chasers.

Regulators Have a Job to Do Too

On the regulatory side, what happened in the commercial space sector should serve as a wake-up call.

When companies release inaccurate or incomplete information without proper risk warnings, they mislead investors into making bad decisions.

That has real consequences—people lose money, trust in markets erodes, and capital misallocation happens.

The Shanghai Stock Exchange did the right thing by cracking down on non-compliant disclosures.

Stronger information standards and enforcement create cleaner markets.

They weed out the bad operators and create conditions where good companies can actually be valued rationally.

That’s how you build a healthy market environment for both investors and legitimate businesses.

The Bottom Line on Commercial Space Stocks

Commercial space exploration is genuinely exciting.

The technology is real.

The policy support is real.

The market opportunity is real.

But the valuations got completely unhinged, the information quality was sketchy, and regulators had to step in.

That correction was necessary and healthy.

Going forward, investors who stick to fundamentals—looking at actual technological progress, commercial traction, and honest disclosure—will have a real shot at capturing value in the commercial space industry.

The ones who chase hype cycles will keep getting punished.

That’s just how markets work.

References

• Don’t Let Conceptual Hype Derail Commercial Space Exploration – Economic Daily
• Official Website – China National Space Administration (CNSA)
• Market Surveillance Reports – Shanghai Stock Exchange
• Reusable Rocket Technology Progress – LandSpace (Lan Jian Hangtian 蓝箭航天)