Why Rocket Lab, Planet Labs, and AST SpaceMobile Stocks All Dropped on Monday

Investors sold off tech stocks hard on Monday, with the Nasdaq down 1.5% through 11:30 a.m. ET, versus drops of only 0.6% for the broader S&P 500, and actually a tiny gain for the Dow Jones Industrial Average.

Volatile space stocks are getting hit particularly hard, with Rocket Lab (NASDAQ: RKLB) shares down 4.5%, and both Planet Labs (NYSE: PL) and AST SpaceMobile (NASDAQ: ASTS) stocks off 4%. And why?

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The consensus in the media seems to be that this sell-off can be blamed almost entirely on "a slew of tariffs previously announced by the Trump administration [that] will go into effect on Wednesday," as CNBC puts it, and on worries over additional reciprocal tariffs that the president has yet to specify, which could also be announced Wednesday.

Investors are worried about what these tariffs might do to the economy, but the president says he "couldn't care less" whether, for example, higher tariffs raise the price of foreign-produced automobiles. He has also stated that the reciprocal tariffs will affect all countries and will last for the entirety of his second term, according to CNBC.

But why would such a broad tariffs policy be affecting these three space stocks particularly hard, such that their share prices are falling 2 and even 3 times more than the broader stock market?

What tariffs mean for Rocket Lab

According to data from S&P Global Market Intelligence, 38% of Rocket Lab's revenue comes from outside the United States, which may help to give investors a big-picture idea of the company's exposure to tariff risk.

More granularly, Rocket Lab's business involves both building and launching spacecraft and rockets. Most of the building happens within the United States, but may involve the importing of parts from abroad, which might be made more expensive by tariffs. Most of the launching currently happens in New Zealand, on the other hand, and should be more insulated from tariffs imposed by the United States on imports from abroad.

My bigger concern with respect to Rocket Lab is what might happen if other countries seek to respond to U.S. tariffs by raising tariffs and other trade protection barriers of their own, or otherwise "punishing" companies that are viewed as American-owned, as part of a trade war. This is hard to predict, however, which not only makes it hard to gauge how much Rocket Lab might be affected by a trade war, but also increases investor uncertainty.

And investors hate uncertainty.

What tariffs mean for Planet Labs

Taking a similar orbital view, note that Planet Labs gets most of its revenue from outside the U.S. -- about 55% in fact. The company builds its satellites here in the U.S., but again, may import parts to do this, and thus may face higher production costs in the event U.S. tariffs on those imports go up. Planet Labs has used both U.S. and foreign launch companies to put its satellites in orbit.

The company's revenue primarily comes from contracts for its provision of satellite images and analytics of the same, to customers both here and abroad. Once again, therefore, the big risk to Planet Labs stock, I think, will be found not so much in the U.S. tariffs, but in other countries' response to these tariffs.

What tariffs mean for AST SpaceMobile

AST SpaceMobile's case is more singular than those described above. Like Rocket Lab and Planet Labs, the company builds its satellites in the U.S., and presumably sources parts from around the world. As tariffs on imported satellite parts get hiked, AST's cost of producing satellites would presumably also rise.

Unlike Rocket Lab and Planet Labs, however, AST SpaceMobile doesn't currently do much business anywhere, either here or abroad, as it hasn't yet begun large-scale commercial communications among terrestrial cellphones and its own orbiting satellites. The company does plan to conduct business both within the U.S. and internationally, and has lined up communications partners all around the globe. But for now, there's no really good data on the breakdown of where AST's revenue comes from -- because there isn't much revenue to count.

Image source: Getty Images.

The big picture for space investors

Rising tariffs and a looming trade war threaten to raise costs both in the U.S. and internationally, stoking inflation concerns that may prompt central banks (such as the Federal Reserve) to keep interest rates higher for longer, and potentially even raise interest rates to combat inflation. As a general rule, investors view high interest rates as bad news for stocks, and particularly so for stocks that are unprofitable -- which is currently the case for Rocket Lab, Planet Labs, and AST SpaceMobile.

If you're looking for the simplest reason why these three stocks in particular are going down today, this probably has a lot to do with it as well.

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Rich Smith has positions in Rocket Lab USA. The Motley Fool recommends Rocket Lab USA. The Motley Fool has a disclosure policy.