Space Exploration Technologies Corp has become a holding in roughly 100 exchange-traded funds, yet it remains absent from ESG portfolios following a severe assessment from MSCI. The research firm assigned SpaceX its lowest possible ESG rating of CCC on June 11, citing significant governance risks and severe controversies. This rating effectively disqualifies the stock from inclusion in many ESG funds, which typically screen out companies with bottom-tier governance scores or low overall ratings.

The exclusion creates a sharp contrast between mainstream ETF strategies and ESG mandates. While SpaceX has quickly integrated into space, innovation, growth, and broad-market ETFs, ESG funds have stayed on the sidelines. Major ESG funds such as the iShares ESG Aware MSCI USA ETF, iShares ESG MSCI KLD 400 Social ETF, and iShares ESG Aware MSCI EAFE ETF do not hold the stock. These funds rely on MSCI or Sustainalytics methodologies that limit exposure to companies with severe controversies or weak governance practices.

Governance Risks Drive Low Rating

MSCI's assessment focused heavily on governance factors, including corporate oversight, shareholder rights, disclosure standards, and insider control. The firm also assigned an "orange flag" controversy designation to SpaceX. Governance has historically been viewed as the ESG factor most closely linked to financial outcomes, making the rating a significant barrier for ESG managers.

The situation presents a dilemma for ESG investors. By excluding a stock that has rapidly become a market favorite, ESG funds risk lagging benchmarks if SpaceX's growth trajectory continues. However, proponents argue that the screening process identifies risks the broader market may overlook, potentially validating the strategy if governance issues materialize later.

ESG Investing Faces Headwinds

The exclusion comes as ESG investing faces broader challenges. Bloomberg Intelligence ETF analyst Eric Balchunas noted that ESG has largely vanished from industry discussions, citing more than 125 ESG ETF closures in recent years. Many funds are dropping ESG terminology from their names as investor demand fades. Critics argue that ESG screens force investors to miss out on high-growth opportunities, a point underscored by SpaceX's surge since its public debut.

For now, the market remains split. Nearly 100 ETFs own SpaceX, but none carry an ESG mandate. The divergence underscores the ongoing debate over whether governance screens add value or simply exclude high-performing assets.

Ross Gerber, CEO of Gerber Kawasaki, suggested over the weekend that Space Exploration Technologies Corp.'s Starlink could develop a device capable of challenging Apple Inc.'s iPhone dominance. Gerber proposed a 'truly great AI phone' featuring satellite connectivity, exceptional battery life and an AI-first operating system where users simply tell the device what to do.

Starlink's Potential Entry

Gerber outlined his vision on X, stating that Starlink has the opportunity to build a phone optimized for AI tasks. He emphasized a system where verbal commands execute complex actions automatically. When asked who would create such a device first, Gerber pointed to the potential for Starlink to enter the hardware market.

Google Pixel's Existing Capabilities

In response to Gerber's suggestion, users noted that Alphabet Inc.'s Google Pixel smartphones already offer comparable functionality. The Pixel 10 series, powered by the Tensor G5 chip, utilizes Gemini AI to handle tasks such as opening food delivery apps, locating restaurants and adding items to carts via screen automation. Payment authorization remains the primary step requiring manual intervention for security reasons.

Apple's Market Position

Despite the debate over AI capabilities, Apple continues to lead the U.S. smartphone market. According to Statcounter data for May 2026, Apple held a 61.51% market share, followed by Samsung Electronics at 20.74% and Google at 3.86%. In April, Apple reported fiscal second-quarter iPhone revenue of $56.99 billion, an increase from $46.84 billion in the same period a year earlier.

Future AI Smartphone Developments

SpaceX CEO Elon Musk hinted earlier this year that a Starlink smartphone is not out of the question, describing it as a device optimized purely for running maximum performance per watt neural nets. The discussion occurs as Apple faces scrutiny over its AI strategy following recent Siri AI announcements.