Key Points
The recent sell-off in space stocks was driven more by money rotating into SpaceX and higher interest rates than by worsening fundamentals.
Rocket Lab looks like the stronger long-term choice thanks to its diversified business, growing backlog, and upcoming Neutron rocket launch.
Intuitive Machines offers higher upside if lunar missions succeed, but its heavy reliance on NASA and mission execution makes it a much riskier investment.
The space sector just had the wind knocked out of it. Over the past month, shares of Rocket Lab (NASDAQ: RKLB) tumbled roughly 24%, while Intuitive Machines (NASDAQ: LUNR) fell a stomach-churning 40.5%. The irony is that neither drop had much to do with the companies themselves.
So the question for opportunistic investors is a fair one: After that kind of pullback, which of these two is the better buy today?
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Why did both stocks fall so hard?
The main culprit is what traders have dubbed the "SpaceX Effect." When Space Exploration Technologies (NASDAQ: SPCX) went public last month in a blockbuster listing, investors sold other space names to free up cash for the shiny new giant, and the whole group dropped in unison. Rising interest rates added to the pain, because both of these companies are long-duration bets whose profits sit years in the future -- exactly the kind of stock that gets marked down when money gets more expensive. In other words, the sell-off was largely about sentiment and rotation, not a sudden crack in either business.
Rocket Lab: The diversified operator
Rocket Lab is the more established of the two, and I think that matters. It already earns real revenue launching small satellites on its Electron rocket, and it runs a growing Space Systems arm that builds satellites and components for other customers -- a second engine that keeps money coming in between launches. The big catalyst ahead is Neutron, a larger rocket meant to compete for heftier payloads; the company is targeting a first flight late this year and has already lined up a multilaunch deal with a customer. Its backlog has swelled, which gives some visibility into future work.
The caveat is that Neutron has slipped before, and new rockets are notoriously hard to get flying on schedule. Rocket Lab also isn't consistently profitable yet, so patience is required.
Intuitive Machines: The lunar pure play
Intuitive Machines is the narrower, more speculative bet. Its business is built around the moon -- landing spacecraft on the lunar surface and providing services for NASA's return there. It has developed a meaningful pipeline, including a sizable NASA lunar mission award, a lunar terrain vehicle contract, and near-space communications work, and it bulked up its backlog through an acquisition earlier this year.
But that focus cuts both ways. Intuitive Machines leans heavily on NASA contracts, which makes it vulnerable to shifting government budgets and priorities, and lunar landings are unforgiving -- the company knows firsthand how easily a mission can go sideways. That concentration and risk are big reasons its stock fell the hardest of the two.
Which is the better buy today?
For most investors, I'd lean toward Rocket Lab. It offers something closer to a real, diversified space business -- two revenue streams, a clear next catalyst in Neutron, and a growing backlog -- rather than a single-thread bet on one hard problem. After a 28% haircut, you're paying less for a company that is arguably further along the path to standing on its own.
That said, Intuitive Machines is the higher-torque option. If your goal is maximum upside and you can stomach real volatility, a drawdown on a company with a genuine lunar franchise could rebound sharply if its missions land and NASA funding holds. It's the riskier ticket, but potentially the bigger payoff.
Both of these stocks are cheaper than they were a month ago, largely because of a rotation into SpaceX, not because their prospects collapsed -- and that's precisely the kind of dislocation that can create opportunity. My honest read is that Rocket Lab is the sturdier choice for a long-term investor, while Intuitive Machines suits those who want a swing-for-the-fences lunar bet. Either way, treat these as small, speculative positions in an industry where the timelines are long and the setbacks, as this month showed, can be abrupt.
Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Machines and Rocket Lab. The Motley Fool has a disclosure policy.