China’s ‘Rocket Shares’ Surge as Investors Pivot from AI to Aerospace Race

The transition of capital from artificial intelligence to the commercial aerospace sector marks a significant evolution in China’s internal investment logic. For much of the past two years, AI dominated the narrative, driven by global breakthroughs in generative models and domestic hardware aspirations. However, as that trade begins to show signs of exhaustion and technical plateaus, investors are pivoting toward 'hard tech' sectors that align more directly with Beijing’s strategic security goals. This shift is evidenced by the 'rocket shares' phenomenon, where companies like China Spacesat and Hunan Aerospace Huanyu Communication Technology have become the new darlings of the Shanghai and Shenzhen exchanges.

The performance metrics are stark and reflect a high-conviction market. While the benchmark CSI 300 Index has struggled to find momentum with a modest 2% gain this year, the commercial aerospace gauge has surged by 10%, building on a massive 76% rally in 2025. This outperformance suggests that the market is pricing in a long-term structural shift rather than a fleeting retail trend. The primary catalyst is the perception of aerospace as the next critical battleground in the systemic rivalry between the United States and China. With the U.S. maintaining a significant lead through SpaceX’s reusable Falcon 9 and Starship programs, Beijing has signaled through its latest five-year development plan that it will no longer concede the orbital commons.

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While the benchmark CSI 300 Index has struggled to find momentum with a modest 2% gain this year, the commercial aerospace gauge has surged by 10%, building on a massive 76% rally in 2025.

Central to this surge is the inclusion of aerospace as a top-tier national priority. This policy framework translates into tangible state support, ranging from subsidized research and development to the fast-tracking of regulatory hurdles for private enterprises. The most prominent example of this 'fast-track' environment is LandSpace, a private firm currently undergoing an accelerated IPO review. LandSpace is widely viewed as the primary domestic challenger to SpaceX, focusing heavily on the liquid-oxygen methane engines and reusable rocket technology that have revolutionized launch economics in the West.

Industry analysts, including Hou Bin of Great Wall Securities, suggest that this policy tailwind is expected to drive down launch costs to a point where Chinese firms can eventually match SpaceX on a per-kilogram basis. This goal of cost parity is essential for the broader 'domestic substitution' strategy. By developing a self-reliant, low-cost launch infrastructure, China aims to insulate its downstream industries—including satellite communications, Earth observation, and global positioning—from potential Western sanctions or supply chain disruptions. The 'substitution' narrative is a powerful driver for domestic investors who see it as a guaranteed source of long-term government contracts.

However, the 'meme' nature of these stocks also introduces a layer of volatility that professional observers must monitor. The term 'rocket shares' implies a level of retail-driven enthusiasm that can sometimes outpace fundamental technical progress. While companies are conducting frequent tests of reusable stages, the gap between a successful vertical takeoff and landing (VTOL) test and a commercially viable, rapidly reusable fleet remains significant. Investors are currently betting on the inevitability of this technological catch-up, fueled by the belief that the state cannot afford to let the sector fail in its competition with the West.

Looking ahead, the successful IPO of LandSpace will serve as a critical litmus test for the sector's maturity and the sustainability of this investment frenzy. If LandSpace can demonstrate a clear path to reusable orbital delivery, it will likely trigger a second wave of investment into the broader supply chain, particularly in advanced materials and precision communication components. For now, the 'rocket trade' represents a fusion of nationalist sentiment and strategic capital allocation, positioning the heavens as the ultimate theater for China’s technological and economic ambitions.