Elon Musk--the world’s first trillionaire--has a dizzying array of businesses. For instance, Tesla is the most valuable car company in the world, and it also sells battery storage for homes, businesses, and utilities. Musk is also a majority owner of X (formerly known as Twitter) which is perhaps the most important social media platform on the globe. He controls xAI, which developed and operates the AI system that drives the Grok platform, and he runs Neuralink, which researches brain-computer interfaces.
He also runs SpaceX, which is the clear leader in the market for space travel. Finally, Musk started Starlink, a network of satellites that provides internet access across the globe, mainly to people in areas where terrestrial coverage is weak or nonexistent.
X, xAI, and Starlink recently merged with Musk’s SpaceX, which had an IPO earlier this year. The combined value of SpaceX and Tesla today is nearly $3 trillion.
Musk’s businesses have a dizzying agenda of cutting-edge services they want to provide to the public: Musk has said he wants to create an army of autonomous robots, put data centers in outer space, make Teslas fully self-driving, provide grid power support via batteries, and end paralysis.
To that list of audacious goals, Musk recently added another--which is to compete in the telecom market by creating its own cell phone network. Musk’s recent focus on this mature, competitive market is anomalous with his other ambitions, and it has left his shareholders scratching their heads.
For starters, it’s unclear what gives Musk or SpaceX some sort of competitive advantage in the market. While the Starlink network may give it a global reach, it clearly lacks the ability to provide sufficient bandwidth in dense urban markets--which is where a majority of the U.S. population lives.
While SpaceX recently spent $20 billion obtaining spectrum, and Musk has promised to have a daily launch of satellite-delivering rockets within the next year, even that implausible rollout won’t be sufficient to make it competitive in a populous market.
On SpaceX’s inaugural earnings call following its record-breaking $86 billion IPO, Chief Financial Officer Bret Johnsen told investors that the company's forthcoming space-based AI data centers--orbital racks of optimized Nvidia Vera Rubin chips beginning to launch next year--are expected to pay back their capital expenditures in under twelve months.
Terrestrial hyperscalers routinely model returns over five to ten years. SpaceX is telling investors it will do it in one because satellites bypass the two constraints crushing terrestrial AI: the electrical grid and the permitting office. AI compute accounted for 82 percent of the company's first-half capex. That is where its money, its engineering talent, and its senior executive attention should be going.
But instead, in the earnings call Chief Operating Officer Gwynne Shotwell hinted at a full-blown consumer mobile service that would compete head-on with AT&T, Verizon, and T-Mobile. The plan involves stacking cellular femtocells atop the Starlink rooftop antennas customers already own, paired with the 65 MHz of spectrum SpaceX purchased from EchoStar. She called it "quite capex efficient."
However, not all analysts are persuaded. BNP Paribas wrote that "the credibility of their plans in wireless remains questionable," noting that Starlink antennas cluster in rural areas where femtocells add almost nothing. Meanwhile, ABI Research’s Dimitris Mavrakis was more on the nose: “Elon Musk is nuts if he thinks 5G small cells with Starlink backhaul can offer better (and cheaper) service than AT&T, Verizon and T-Mobile.”
Shotwell also overstated the size of the U.S. wireless carrier market by roughly $250 billion in the call, which did not help her case.
Bloomberg's Thomas Black, a fair chronicler of SpaceX's real wins, wrote that the mobile ambition "may never get out of the 'almost there' zone." Tim Farrar of TMF Associates, one of the industry's most careful satellite analysts, put it more bluntly: threats to buy a mobile operator or build a terrestrial network are a "paper tiger" that "would do nothing to leverage SpaceX's 'core strengths.'"
There is a reason for this pushback, and it extends far beyond the fundamentals of an industry where the big three carriers are constantly fighting to retain current and acquire new subscribers from each other. The physics of dense terrestrial networks--latency, bandwidth per square kilometer, indoor penetration through concrete and steel--all depend on established infrastructure and decades of massive investments in spectrum, fiber, small cell antennas, and towers.
AI compute is an exponential market in which SpaceX has a structural advantage no terrestrial competitor can match, while consumer mobile is a mature market in which SpaceX has a structural disadvantage that no amount of clever rooftop engineering will erase.
Every dollar and every minute spent designing femtocell architectures for suburban homes is a distraction from SpaceX’s comparative advantage. Those investments may ultimately mean the difference between winning the defining industrial race of the next decade while it loses a skirmish with three of the most entrenched incumbents in America.
There is clearly one economic race that will determine which companies dominate the next quarter-century, and it is not the fight over monthly cell phone bills: It is the buildout of the data centers, chips, and power infrastructure required to train and serve models that are already transforming every knowledge industry in the American economy.
