Space stocks are retreating across the board as the frenzy that once lifted the sector loses steam. An analyst cited by MarketWatch said investors appear to be having second thoughts about lofty valuations.

The pullback marks a sharp reversal from months of high-flying gains driven by enthusiasm around SpaceX and its peers. It suggests the market is recalibrating expectations for a sector that had become a favorite among speculative traders.

The analyst did not provide specific figures on the valuation declines, noting only that shares are "getting punished." No individual stock performance data aside from the general trend was reported by MarketWatch.

The rout could cool the pipeline for new space company IPOs and dampen investor appetite for related SPACs. For retail traders who piled in late, the retreat may mean extended losses.

One lingering question is whether the selloff represents a healthy correction or the beginning of a longer downturn. As one analyst noted, the sector's fundamentals have not changed—only sentiment has.