Rocket Lab's Space Surge: Navigating the Political Stars

Rocket Lab's stock has soared in 2025, fueled by a confluence of geopolitical tailwinds and defense contracts that are reshaping its trajectory in the space industry. The company's ascent highlights a broader trend: the growing interplay between national security priorities and commercial space ventures. For investors, the question is whether Rocket Lab can translate its political advantages into sustained profitability—or if geopolitical risks and competitive pressures will cap its rise.

Defense Contracts Drive Momentum

Rocket Lab's recent wins in government programs underscore its strategic pivot toward national security. In April 2025, it secured a $5.6 billion slot in the U.S. Air Force's National Security Space Launch (NSSL) program, positioning it as a critical partner for high-priority military satellite launches. This follows its inclusion in the $46 billion Enterprise-Wide Agile Acquisition Contract (EWAAC), which allows it to bid swiftly for hypersonic testing missions.

The company's Hypersonic Accelerator Suborbital Test Electron (HASTE) vehicle has become a linchpin of these efforts. Designed as a suborbital variant of its Electron rocket, HASTE can deploy payloads at speeds exceeding 7.5 km/s, enabling tests of hypersonic glide systems and air-breathing engines. With three U.S. Department of Defense missions completed in 2025—and two launched within 21 days—the vehicle has proven its agility in a sector where speed matters.

Rocket Lab has also expanded its reach into allied nations. Its selection for the UK's £1 billion Hypersonic Technologies & Capability Development Framework (HTCDF) marks a geopolitical win, as the U.K. seeks to reduce reliance on Russian and Chinese propulsion technology.

Geopolitical Context: The New Space Race

Rocket Lab's success reflects a broader geopolitical shift. Governments worldwide are prioritizing sovereign space capabilities to counter perceived threats from rival nations. The U.S. and U.K. are racing to modernize their hypersonic arsenals, while China's rapid advancements in space technology have intensified competition. For Rocket Lab, this has created a “safety net” of recurring defense contracts with higher margins than its commercial launches.

The acquisition of Geost, LLC—a provider of electro-optical payloads for national security satellites—further underscores this strategy. By vertically integrating payloads into its launch services, Rocket Lab positions itself as a one-stop shop for governments seeking end-to-end space solutions.

The Risks Lurking in the Stars

Despite the tailwinds, Rocket Lab faces significant hurdles. Its stock trades at a forward price-to-sales (P/S) ratio of 16.77x—far above the aerospace sector's average of 2.05x—implying investors expect flawless execution. Yet the company remains unprofitable, with a Q1 2025 net margin of -51.76%, largely due to development costs for its Neutron rocket. Designed to carry larger payloads, Neutron's delayed launches and escalating expenses have widened its adjusted EBITDA loss to $28–30 million in Q2.

Competitive pressures loom large. SpaceX's Starship and Blue Origin's New Glenn threaten Rocket Lab's dominance in small launches, while traditional defense contractors like Northrop Grumman and Lockheed Martin could undercut its niche in hypersonic testing. A misstep in Neutron's development or a shift in defense budgets could quickly reprice the stock.

Investment Outlook: A Balancing Act

Rocket Lab's bull case hinges on three pillars:
1. Neutron Success: A proven, cost-effective Neutron rocket would open doors to larger government and commercial contracts.
2. Hypersonic Growth: Expanding its role in U.S. and U.K. hypersonic programs, potentially extending its backlog.
3. Strategic Acquisitions: Seamless integration of Geost and planned Mynaric acquisition (a laser communications firm) to enhance its payload and data capabilities.

In this scenario, Rocket Lab could justify its valuation, with a potential 10% upside from Q2 2025 levels.

The bear case, however, is stark. A delay in Neutron's first orbital launch (scheduled for late 2025) or a failed hypersonic test could spook investors. Additionally, if the U.S. or U.K. shifts priorities toward other contractors, Rocket Lab's backlog might stagnate.

Verdict: Proceed with Caution

For now, Rocket Lab's stock appears precariously balanced between geopolitical optimism and execution risks. Investors should consider taking a “wait-and-see” approach until the company demonstrates consistent profitability or a meaningful pullback below $20. While its long-term position as a defense tech leader is compelling, the current valuation leaves little room for error.

In the new era of space militarization, Rocket Lab is a beneficiary—but its future remains as uncertain as the stars themselves.