SpaceX Just Made the Case Against Itself

Reuters dropped a remarkable story last week…

Apparently, in the middle of America’s active combat campaign against Iran — with U.S. kamikaze drones conducting strikes deep into Iranian territory — SpaceX executives sat down with the Pentagon and informed Defense Department officials that the company would be raising its Starlink terminal pricing by five times.

The Pentagon had been paying about $5,000 per month per Starlink terminal to power the LUCAS suicide drones it was using against Iran. SpaceX wanted $25,000 per month.

The company argued that the drones were drawing on what amounted to a higher-tier aviation service and the military should be paying accordingly.

But Pentagon officials pushed back. They argued that LUCAS drones used Starlink connections for only minutes or hours at a time, not the continuous coverage that justified aviation pricing.

It didn’t matter.

With strikes ramping up against Iranian targets and the U.S. military deeply reliant on Starlink connectivity to execute the mission, the Pentagon caved.

It agreed to the price hike, nearly doubling the per-unit cost of each LUCAS drone overnight.

SpaceX got its money — and just weeks before SpaceX is set to launch one of the largest IPOs in financial history at an expected valuation of roughly $1.75 trillion.

However, this dispute is just the latest in a string of clashes between SpaceX and the Pentagon over Starlink pricing.

And it could come at a future cost…

What This Actually Tells Us About SpaceX

I’ll be honest. I’ve been skeptical — even critical — of Elon Musk and his ventures for a long time.

And stories like this are exactly why.

There is no other major American defense contractor that could — or maybe even would — pull a stunt like this in the middle of a shooting war and get away with it.

If Lockheed Martin tried to raise the price of F-35 maintenance contracts during a live combat operation, it would face congressional hearings within 48 hours.

If RTX demanded an emergency premium on Patriot interceptors while American troops were under fire, the resulting political backlash would consume the news cycle for weeks.

But it was Elon and SpaceX, and the Pentagon paid up. Quietly. Without public debate and without a serious alternative to turn to.

And that’s the real problem here.

For all the talk of SpaceX being a national security partner, the truth is the company has become more of a national security liability.

The Pentagon’s dependence on Starlink connectivity to power its newest drone systems has handed Elon Musk a level of operational leverage over American military operations that no private company should have. 

And clearly, he’ s more than willing to use it.

It’s not the first time he’s done so, either.

In 2022, Musk personally restricted Starlink coverage over Crimea to undermine Ukrainian operations against Russian forces — a unilateral decision by a private citizen that altered the course of an active war.

We’ve also seen SpaceX clash repeatedly with the Pentagon over commercial terms while remaining the only viable provider of certain capabilities.

And now, with American lives on the line in Iran, we just saw the company extract a 5x price hike out of the Department of War.

That isn’t a model of public-private partnership.

It borders on extortion.

And it virtually guarantees that the U.S. government — across multiple administrations and both parties — is going to commit serious capital to building out alternatives.

Where the Real Opportunity Lives

This is why I’ve been telling readers for months that the right way to play the space and satellite communications boom isn’t to chase the SpaceX IPO at a $1.75 trillion valuation.

It’s to invest in the companies that are quietly going to benefit from every Pentagon, congressional, and allied government effort to break SpaceX’s stranglehold over the satellite communications market.

A handful of names stand out.

AST SpaceMobile (NASDAQ: ASTS) is building a satellite-to-smartphone constellation that bypasses the terminal model entirely.

Its BlueBird satellites can connect directly to unmodified phones, and the company has commercial partnerships with AT&T, Verizon, Vodafone, and others.

Its satellites are physically much larger than Starlink’s and provide stronger signal precision — exactly the kind of capability the Pentagon will need as it diversifies away from SpaceX dependence.

Iridium Communications (NASDAQ: IRDM) operates one of the most established satellite constellations in the world, with deep ties to U.S. government and military customers that long predate SpaceX.

It’s already a key player in direct-to-device satellite communications and has been openly opposing the kind of spectrum consolidation that would entrench SpaceX further.

Viasat (NASDAQ: VSAT) has been around for years as a government and commercial satcom provider, generates most of its revenue from government contracts, and recently partnered with AST SpaceMobile on direct-to-device service.

It’s not the sexiest name on the market, but its government satcom business has been quietly building momentum.

And Globalstar (NASDAQ: GSAT) is the satellite provider behind Apple’s iPhone emergency satellite features and operates a niche but well-established LEO constellation with growing government interest.

These are the companies that win when Washington wakes up to the SpaceX problem.

That’s the real investment story coming out of this week…

It’s not whether the SpaceX IPO is worth $1.75 trillion or $2 trillion or some inflated valuation the underwriters dream up.

It’s that America’s reliance on a single private company for critical national security infrastructure has officially become untenable — and the contracts to build alternatives are about to start flowing.

SpaceX just made the case against itself.

The investors who position around that — rather than chasing the IPO at peak valuation — are the ones who are going to come out ahead.