Space Exploration Technologies Corp. (NASDAQ:SPCX) CEO Elon Musk on Sunday outlined an aggressive long-term outlook for the company’s Starlink satellite internet service, saying that it could eventually generate more than $1 trillion in annual revenue by capturing a majority of internet traffic.
Musk said the rapid expansion of artificial intelligence and robotics could drive a massive increase in bandwidth demand, creating an opportunity for Starlink to capture a much larger share of the market.
Musk Says Starlink Could Capture 50% of Internet Traffic
Reacting to angel investor and All-In Podcast co-host David Friedberg’s comments, Musk argued that the rise of AI and robotics will fundamentally change the economics of communications by creating an enormous new demand for data transfer.
"Bandwidth demand will increase massively due to AI & robotics. Their need for data transfer is orders of magnitude more than humans!" he said.
That could give Starlink room to expand well beyond its current satellite internet business, according to Musk. Even if the overall communications market merely doubles, he believes Starlink could capture a significant portion of it outside China.
"Even if the communications market merely doubles in size, I would expect Starlink to reach at least 25% market share outside of China (maybe one day in China too), which would be over half a trillion dollars in revenue per year," Musk said.
But his most aggressive projection goes considerably further.
"It’s not out of the question that Starlink carries more than 50% of Internet traffic long-term," Musk said, adding that such an outcome "would probably be over a trillion/year."
"There is no obvious impediment to that outcome so far," he added.
Friedberg Sees Starlink Becoming SpaceX’s Cash Machine
Friedberg argued that Starlink could become a trillion-dollar company within just 18 months.
"Starlink alone could be generating on the order of $40 billion of revenue top line, with a huge amount of that flowing to free cash," Friedberg said. "That could be $30 billion in free cash flow within the year."
Friedberg argued that Starlink’s recurring subscription revenue could warrant a premium valuation, saying, "The Starlink business alone could be a trillion-dollar market cap within 18 months."
The investor also pointed to Starlink’s disruption of traditional satellite and telecom businesses.
"You can see it in AT&T, Verizon, HughesNet, and Viasat… That market got decimated by Starlink," Friedberg said.
He sees an even bigger opportunity if Musk moves ahead with a Starlink handset, which could accelerate subscriber growth.
"Right now, he’s adding 2 million subscribers on the consumer side per quarter. You could see that going to 4 to 5 million a quarter," Friedberg said. "You could actually see an acceleration."
For Friedberg, the significance of Starlink goes beyond its standalone valuation. The business could generate enough cash to finance Musk’s other ambitious projects.
"And the rest of it is like, is Elon going to do well with the excess capital that’s spinning out of Starlink?" Friedberg said. "I don’t know who else I would give it to, considering what he’s doing with Starship, AI compute, and the Terafab."
SpaceX Increases Focus On AI Compute Capacity
The ambitious plans for Starlink come amid SpaceX’s increased focus on AI compute capacity. Musk has previously indicated that the Terafab facility, which targets 1 terawatt of annual AI compute capacity, will be a crucial element in Tesla’s future vision, with a significant portion dedicated to AI spacecraft.
Additionally, Starlink’s plans to enter the mobile market have faced skepticism. T-Mobile’s CEO questioned the differentiation of Starlink’s planned terrestrial network, while analysts highlighted the challenges of matching established networks.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
Login to comment