Starlink's Challenges Threatens The High Valuation Of Elon Musk's SpaceX: Report - Tesla (NASDAQ:TSLA), Amazon.com (NASDAQ:AMZN)

Elon Musk‘s SpaceX has seen remarkable success with its satellite network, Starlink, but some experts question whether its current valuation is sustainable.

What Happened: Starlink, a satellite network launched by SpaceX to sell broadband internet access, has achieved impressive growth since its inception. As of March, the service had amassed 5 million customers, more than doubling the market of previous satellite communications leaders, Viasat and Hughes.

Starlink’s success has significantly contributed to SpaceX’s valuation, which touched $350 billion in December, positioning it as the world's most valuable private company. However, some industry experts express concerns about the sustainability of this valuation, reported Forbes.

While Starlink is making money by offering internet access to airplanes, ships, and remote areas, its biggest opportunity lies in high-speed residential internet access. Research firm Quilty Space expects this market to contribute 63% of Starlink’s revenue this year.

Despite the encouraging numbers, some experts believe Starlink’s potential may be overestimated by investors. The service faces technical limitations, such as the inability to serve many internet customers in densely populated areas. Furthermore, its high prices may limit its reach in rural regions and developing countries.

Independent telecom consultant Tim Farrar told Forbes, "..I don’t think that Starlink alone as it exists today and the reasonable view of its future growth is going to support that sort of valuation,"

Competing services, including Amazon‘s AMZN upcoming satellite constellation, Kuiper, pose another challenge. With Amazon’s financial resources and existing infrastructure, Kuiper could pose a significant threat to Starlink’s market dominance.

Why It Matters: In March, SpaceX surpassed Tesla to become Elon Musk’s most valuable asset as Tesla’s stock value plunged by 50% due to Musk’s deep involvement in President Donald Trump‘s Department of Government Efficiency (DOGE). This shift in Musk’s assets has raised questions about his ability to manage his responsibilities at both Tesla and DOGE.

Adding to the complexity, in April, Bell Canada, a telecom giant, urged the Canadian Radio-television and Telecommunications Commission (CRTC) to exclude Starlink from receiving millions in annual subsidies. This move came amid a wave of national criticism of Musk’s ventures due to his ties with the Trump administration.

These developments underscore the challenges Starlink faces in maintaining its market dominance and valuation. Despite these concerns, SpaceX President Gwynne Shotwell thinks Starship has great potential to contribute to humanity. "Ultimately, I think Starship will be the thing that takes us over the top as one of the most valuable companies,” stated Shotwell.

Economist Pierre Lionnet sees no near-term demand to justify optimistic space industry forecasts, noting flat satellite launch needs outside of Starlink. He also stated that space tourism remains prohibitively expensive, with ticket prices likely exceeding $100,000 per passenger.