Elon Musk’s Quiet Acquisition Has Everything to Do With 5G

When SpaceX does something, you know about it.

A close-up shot of Tesla (TSLA) CEO Elon Musk.

Source: vasilis asvestas / Shutterstock.com

Whenever one of its rockets launches or lands, media outlets everywhere plaster it all over our screens.

Scroll YouTube for a while, and you can find thousands of Elon Musk fans cheering SpaceX’s admittedly impressive launches and landings.

SpaceX crashes get blanket coverage as well… and they bring out Musk haters full of schadenfreude.

Earlier this week, however, SpaceX did something very quietly.

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When it acquired Swarm Technologies, a small satellite connectivity startup, it didn’t issue a press release. Musk didn’t tweet about it.

Instead, SpaceX pencil pushers filed some paperwork with the Federal Communications Commission (FCC) — and enterprising reporters dug it up.

Of course, once we found out about it, the SpaceX-Swarm deal got the same amount of attention that everything Musk-related receives.

However, the deal’s surreptitiousness ended up receiving most of the attention. (As did the fact that this is SpaceX’s first acquisition during its 19-year life.)

And that means you could have missed out on learning why SpaceX bought Swarm — and how that ties into the 5G megatrend.

Let’s take a look…

No IoT Without 5G

Swarm operates a constellation of 120 smartphone-sized satellites and a ground station network. In the deal, SpaceX gets all that plus various space licenses and patents.

Of course, the deal makes sense for Swarm. It gets this tiny 30-person company the resources it needs to take on similar “smallsat” companies.

While SpaceX prefers to develop technology internally, this deal puts it in one quick move into the Internet of Things (IoT) business.

Swarm’s “SpaceBEE” satellites communicate with its ground station network of antennas with a Swarm “Tile.” All those devices on the ground are then part of the global IoT network.

The IoT is a vibrant, high-speed network of physical objects — “things” — that are embedded with sensors, software, and other technologies for the purpose of exchanging data and “communicating with” other devices, systems, and/or people.

The global IoT market is expected to reach a value of $1.39 trillion by 2026, up from $761.4 billion in 2020, according to Mordor Intelligence.

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At this point, you’re likely asking what all this has to do with 5G.

Here’s the thing: The IoT cannot reach its true potential without the next generation of mobile broadband that will replace or augment existing 4G LTE connections.

5G technology drastically improves upload and download speeds, while also improving latency, which is the time it takes devices to communicate with wireless networks.

The current 4G network delivers around 100 megabits per second. But once 5G rolls out, that number jumps to 10,000 megabits per second — or 100 times faster than the current speed.

That means an entirely new generation of technologies may become feasible and flourish.

Whereas 4G provided the network speeds necessary to run online apps and mobile streaming, 5G represents a monumental leap forward. It provides the foundation for a whole host of “gee-whiz” technologies… including the IoT and dozens of other innovations now waiting at the starting gate.

Qualcomm estimates that 5G networks will generate a whopping $13.2 trillion in global sales activity by 2035. Other estimates say 5G is about to unleash an economic tsunami worth at least $56 trillion.

You can’t invest in SpaceX… or in Swarm.

But you can do this…

A “Competitive Constellation”

Currently, around 100 satellites are launched every year.

But by the end of the decade, Euroconsult estimates, we’ll be launching nearly 1,000 satellites every year.

By 2028, there could be 15,000 satellites in orbit.

According to Euroconsult, by 2028, there could be 15,000 satellites in orbit.

Morgan Stanley predicts that the global space industry could generate over $1 trillion by 2040, up from $350 billion today.

Moreover, these non-terrestrial networks will become a vital link in the global 5G network deployment.

That’s a high-growth sector we want to be in.

And I like one particular play right now…

Warren Buffett advises buying companies that possess a “competitive moat” — an advantage that secures their market share and growth potential.

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A space company that I recommended to members of my trading service, The Speculator, possesses what I call a “competitive constellation.”

That company is a leading space technology and intelligence company that traces its roots to the early days of space exploration.

Today, dozens of its satellites are orbiting Earth, and this constellation is gathering reams of data and delivering it in various forms to its government and corporate customers. As a result, nearly 4 billion people interact with this company’s technology every month.

Clearly, it has constructed an impressive “competitive constellation.”

But the company does face competitive threats from the likes of other established satellite companies as well as upstarts like SpaceX and Virgin Galactic.

In addition to these corporate threats, it must also grapple with the ongoing technological challenges of space travel and exploration. As astronaut Scott Kelly famously quipped after a SpaceX rocket explosion in 2015, “Space is hard.”

Space exploration failures can lead to charges in the tens of millions against earnings.

In fact, despite delivering a strong quarterly report earlier this month that topped analyst estimates for both revenues and earnings, the company’s shares dipped due to a worse-than-expected announcement about its next-generation fleet of satellites.

Despite this setback, however, the company’s brass maintained its revenue and earnings guidance for the rest of the year.

Bottom line: That selloff seemed like a major overreaction to the satellite delay.

And following that report, I reiterated my belief in the company to Speculator members, stating that this company has compiled a long-term track record of success, despite intermittent setbacks, and I believe it will do so again… and reap sizable earnings growth as a result.

The company, I said, remains a leading space technology and intelligence company that possesses substantial earnings growth potential over the next two to three years.

And I said that I believed the selloff is affording investors a second opportunity to invest in outstanding speculation.

To learn how to get this outstanding speculation as a Speculator member, click here.


Eric Fry

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NOTE: On the date of publication, Eric Fry did not own either directly or indirectly any positions in the securities mentioned in this article.

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