Amazon is paying its biggest rival to catch up

Editor’s note: Amazon Leo begins consumer service this year, and every headline says the same thing. Starlink now has a fight on its hands. But peer under the hood and something very strange shows up. Amazon is paying SpaceX for rocket rides. Amazon's satellite chief is a man Elon Musk once fired. And Amazon's own founder is quietly competing against Amazon. Turns out the space internet race was never really about who has the deepest pockets.

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But before we get to that, let's take a quick look at the markets and what matters…

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And with that out of the way, here's today's big story: why Amazon is quietly paying its biggest rival to try to beat it.

Then his own glass. Then his own rubber. He even bought a slab of rainforest in Brazil, named it Fordlandia, and planted rubber trees on it. Everybody thought he had lost the plot.

Because at the time, no other carmaker did anything like this. They bought parts from suppliers, put them together, and sold cars. Why complicate life? Why sink a fortune into things you could just buy on the open market at a fair price?

Well, Ford had figured out something the industry took another 30 years to catch up on. In a physical business, whoever owns the supply chain owns the margin. Everyone else is just paying rent.

Which brings us to what is happening in the sky right now.

For years, space internet had one serious player. SpaceX’s Starlink now beams broadband to more than 4 million paying subscribers across 100+ countries, from a constellation of over 10,000 satellites. And for years, everyone has been waiting for a challenger.

That challenger is Amazon. In 2019, the company announced Project Kuiper. The plan: launch 3,236 satellites, spend $10 billion, and take on Musk. Last year it quietly rebranded the whole thing to "Amazon Leo". And this week, Amazon confirmed that consumer service will launch commercially before the year ends. Enterprise pilots are already running with Verizon, AT&T, Vodafone, JetBlue, and NASA. Bank of America now expects total spend to hit $23 billion.

Sounds like a real fight. Except…

Amazon Leo is run by a man named Rajeev Badyal. Before he joined Amazon, Badyal was Vice President of Starlink at SpaceX. Which is to say, he was running the very programme Amazon Leo is now trying to compete with.

Then in 2018, Musk fired him. The reason, reportedly, was that progress at Starlink was too slow. Badyal walked out of SpaceX, took his ex-colleagues with him, and quietly started Project Kuiper for Jeff Bezos.

Eight years later, he is running behind schedule on the same problem.

The man Musk pushed out for going too slow on Starlink is now going too slow on the anti-Starlink.

But this isn’t really a story about one executive. It’s a story about what happens when you try to catch a company that owns everything underneath you.

Here’s a number the headlines keep burying.

Because Musk owns the rocket, the factory, and the pad, SpaceX launches its own satellites for roughly $300,000 to $1 million per unit. Amazon does not own a rocket, so it buys launches on the open market. Going rate: about $5.5 to $6 million per satellite.

That is not a rounding difference. That is a ten times gap on the single biggest cost of the business.

Amazon has more cash than SpaceX has ever raised. It does not matter. Cash does not shrink a ten-times cost gap. It just funds more of the gap. And low earth orbit satellites decay in five to seven years, so the launch bill never ends. Which means Amazon’s margin per subscriber is capped somewhere below Starlink’s. Forever.

Here comes the part where the story stops being merely awkward and turns absurd.

To catch Starlink, Amazon needed to launch satellites in a hurry. Its main partners, namely ULA, Ariane, and Blue Origin, kept slipping schedules. So Amazon did something no one expected. It went and bought rocket rides from SpaceX.

Three Falcon 9 flights were contracted in late 2023 and flew in mid-2025, carrying 24 Amazon Leo satellites each. Then in late 2025, Amazon quietly bought ten more Falcon 9 launches from SpaceX. The world only found out this January, in an FCC filing asking for a deadline extension.

Which means every rocket that helps Amazon Leo grow is also… funding Starlink’s cost advantage. Amazon is literally writing cheques to the company it is trying to displace.

And the deadline? Amazon needed 1,618 satellites in orbit by July 30, 2026. It will have about 700. The FCC waived the deadline in June but demoted the spectrum priority of anything launched late. A polite regulatory slap on the wrist.

If this were not strange enough already…

Jeff Bezos’s other space company, Blue Origin, was Amazon Leo’s main launch partner. About 45% of the $10 billion launch budget went there, which is why an Amazon shareholder sued the board in 2023 alleging self-dealing.

Then in January 2026, Blue Origin launched its own consumer satellite internet service to compete with Starlink. And, by extension, with Amazon Leo.

So Bezos is competing with Bezos. Amazon is paying Musk to help Amazon catch Musk. And the whole thing is being run by a man Musk fired for going too slow.

Somewhere, Henry Ford is nodding.

The lesson here is much bigger than one company.

In a software business, capital wins. Copies are free, distribution is cheap, and the last dollar of revenue costs almost nothing. Whoever raises the most usually gets there first.

In a physical business, capital does not save you. The last dollar of revenue costs almost as much as the first, and that cost is set by whoever owns the supply chain. The winner is decided long before the customer swipes a card.

This is why TSMC dominates chip fabs, why Chinese solar makers set the global panel price, why Rio Tinto still runs iron ore. And it is why SpaceX will very likely keep running space internet, even as Amazon sinks another $20 billion into trying to stop it.

So the next time you read that Company X is a serious challenger to Company Y in a real-world industry, skip the balance sheet. Check the supply chain. If X is paying Y for the pipes, or the chips, or the rockets, then the challenge is not a challenge. It is an annuity for the incumbent.

Because in space, as on Earth, the deepest moat is not what sits in the bank.

It is who owns the road.

Pull up Tesla's most recent SEC filing. Page 5.

And you'll see a single line showing $12 billion in revenue from a brand-new "super startup" Elon Musk has been quietly incubating inside Tesla.

This new "super startup" has nothing to do with cars or robots or space or AI…

But it sits at the center of what Blackstone calls "a $23 trillion investment opportunity."

And on July 22, Elon is expected to pull back the curtain and reveal exactly what he's building.

But Adam O'Dell already knows… and he reveals it all in this urgent video.

Today's reply prompt: Which industry do you think has a vertical-integration moat the market is currently underappreciating?

Until then, sip slowly!

The Market Sip Desk