The latest test of Space X's giant Starship rocket failed minutes after launch.
Elon Musk's company said the upper stage was lost due to problems after takeoff from Texas on Thursday.
But the Super Heavy booster managed to return to the launch pad as planned, prompting a round of applause from ground control teams.
The mission took place hours after the first flight of Blue Origin's New Glenn rocket system, backed by Amazon CEO Jeff Bezos.
Both tech billionaires want to dominate the spacecraft market.
“The Starship suffered rapid, unscheduled dismantling during ascent. Teams will continue to analyze data from today's flight tests to better understand the root cause,” SpaceX wrote on X.
“In such tests, success depends on what we learn, and today's flight will help us improve Starship's reliability.”
Unverified footage posted on social media showed what appeared to be a rocket in flames.
The footage shows orange balls of light flying across the sky over the Haitian capital Port-au-Prince, leaving a trail of smoke in their wake.
“Success is uncertain, but fun is guaranteed!” Mr Musk posted on X, sharing a video showing a trail of fire streaking across the sky.
He also said that “improved versions” of the ship and launch vehicle were “already awaiting launch.”
“Initial indications are that we had an oxygen/fuel leak in the cavity above the ship's engine firewall that was large enough to create pressure greater than the vent's capacity,” Musk said some time later, adding that “nothing yet suggests that the next launch will be delayed until next month.”
Video of the launch has received 7.2 million views, according to SpaceX's livestream.
The Starship system lifted off from Boca Chica, Texas, at 5:38 pm EST (22:38 GMT) on the company's seventh test mission.
The Starship's upper stage separated from the Super Heavy launch vehicle after nearly four minutes in flight, as planned.
But then SpaceX public relations manager Dan Huot said live that the mission teams had lost contact with the ship.
The Super Heavy booster managed to return to the launch pad about seven minutes after liftoff as planned, prompting a round of applause from ground control teams.
The US Federal Aviation Administration (FAA) said it was aware of an “anomaly that occurred” during the SpaceX mission.
“The FAA briefly slowed down and directed the aircraft into the area where the spacecraft debris fell. Normal operations have resumed,” the department said in a statement.
This comes a day after a SpaceX rocket blasted off from Florida and carried two private lunar landers and a microrover to the Moon.
An unmanned Falcon 9 blasted off from Kennedy Space Center on Wednesday.
And Bezos' company Blue Origin successfully launched the rocket into orbit for the first time.
It was a huge step forward for Bezos and his company, which had spent years trying to get the rocket into orbit.
