Billionaire investor Chamath Palihapitiya's Social Capital tracked a basket of 10 equal-weight space stocks that surged 1,123 percent between January 2, 2024, and May 28, 2026, before surrendering two-thirds of those gains by mid-October. A hypothetical $10,000 investment peaked at approximately $122,300 before falling to about $40,000 — still a 300 percent gain from the starting point and well ahead of the S&P 500.

The basket included Rocket Lab (RKLB), AST SpaceMobile (ASTS), Intuitive Machines (LUNR), Redwire (RDW), Planet Labs (PL), BlackSky (BKSY), Spire Global (SPIR), Satellogic (SATL), Virgin Galactic (SPCE), and Globalstar (GSAT).

Palihapitiya noted the sector's valuation sensitivity: "Stock prices reflect what investors expect more than what companies earn today." That forward-looking bias explains both the rally and the crash. But the underlying industry fundamentals have shifted structurally.

Space hardware funding reached $17 billion in 2025, up from roughly $500 million in 2012 — more than 30-fold growth even excluding SpaceX. The number of companies launching satellites expanded to 184 in 2025 from 32 in 2000, a sixfold increase that signals a genuinely competitive manufacturing base.

Launch costs per kilogram have fallen 25-fold since the Space Shuttle era, lowering the barrier to orbit and enabling new business models. But the real catalyst is government spending. NASA's share of federal spending dropped from 4.4 percent in 1966 to 0.4 percent in 2025. The U.S. Space Force's budget surpassed NASA's in fiscal 2023, and the fiscal 2027 Space Force request was three times NASA's with an additional $12.1 billion in one-off funding.

Of the seven basket companies that disclose customer composition, 56 percent of revenue came from government in 2025 — or about 60 percent when including private customers funded by government contracts. Palihapitiya sees this as a structural moat: government orders allow firms to expand production and reduce unit costs, creating a path to commercial viability.

For investors, the basket's 300 percent gain from trough remains meaningful, but valuation risk is real. Watch which companies convert government contracts into durable commercial revenue streams. That execution gap will determine whether space stocks stay elevated or face another correction.