Tesla CEO Elon Musk sparked controversy over the weekend by criticizing Lockheed Martin's F-35 fighter jet program, a key defense initiative. Musk’s remarks, delivered via X (formerly Twitter), caused Lockheed shares to drop 3.8% on Monday, closing at $521.89 and wiping out nearly $5 billion in market value.
Musk shared a video on Sunday showing drones flying in coordinated formations, captioned, “Meanwhile, some idiots are still building manned fighter jets like the F-35.” His comments drew attention not only because of his influence as the head of Tesla and SpaceX but also due to his advisory role with U.S. President-elect Donald Trump’s administration.
A scathing report
Musk’s comments come after the U.S. Pentagon has identified significant challenges with the F-35 stealth strike fighter jets, critical to Israel’s Air Force operations, according to a classified 382-page report.
The F-35, known as "Adir" in Israel, faces issues with stealth reliability, maintenance systems and operational efficiency, raising questions about the world’s most expensive weapons system, which has cost $1.8 trillion to develop.
The report revealed recurring malfunctions in the jet's prognostic health management system, designed to detect issues automatically. High false alarm rates—averaging one per hour instead of the standard one per 50 hours—have complicated maintenance and delayed missions. The report also noted problems with the F-35’s lethality due to design flaws in its gun systems and challenges maintaining its low-observability signature, a cornerstone of its stealth capabilities.
Operational availability is another concern, with repair times twice as long as required, limiting the aircraft's mission readiness. Despite its advanced design to counter threats from adversaries like China and Russia, the F-35 has undergone only one relevant test to evaluate this capability.
Cyber vulnerabilities also emerged as a critical issue, with the Pentagon urging Lockheed Martin to enhance defenses against digital threats. The company responded, citing significant investments in cybersecurity.
Lockheed Martin defended the jet, stating that over 90% of its systems meet required standards and attributing many issues to logistical failures rather than design flaws. However, the report’s findings reignite debates over the F-35’s cost-effectiveness and suitability for long-range missions.
The F-35 and its role in defense
The F-35, a cutting-edge fighter jet capable of stealth combat, supersonic flight, and advanced weaponry delivery, is central to the U.S. Defense Department’s arsenal. Comparable aircraft exist in Russia and China, highlighting the strategic importance of the program. Despite Musk’s criticism, experts argue the F-35 fulfills critical roles that drones cannot.
“Modern fighter jets fill irreplaceable roles,” said Richard Aboulafia, managing director of AeroDynamic Advisory. He explained that drones lack the ability to intercept enemy bombers or undertake missions thousands of miles from their launch points, such as supporting naval operations.
Drones are increasingly integral to military strategies, particularly as technology evolves. The Defense Department’s “Replicator Initiative” aims to deploy thousands of autonomous systems for diverse military missions. However, analysts emphasize that the future of military operations involves both drones and manned aircraft, each serving distinct purposes.
Military perspectives on drones
Admiral Samuel Paparo, commander of U.S. Indo-Pacific forces, addressed the growing use of drones during a recent talk at the Brookings Institution. When asked about the potential application of Ukraine’s drone successes against Russia in a hypothetical Taiwan-China conflict, Paparo dismissed the notion that drones alone could counter China’s extensive military capabilities.
“The [Chinese military] has 2,100 fighters, three aircraft carriers and a battle force of 200 destroyers,” Paparo said, adding sarcastically, “Oh well, Roger, we’ve got a couple drones. No problem.”
Lockheed’s response
Lockheed Martin issued a statement, stressing the F-35’s importance. “The F-35 is the most advanced, survivable, and connected fighter aircraft in the world, a vital deterrent and the cornerstone of joint all-domain operations,” the company said. Lockheed also expressed its commitment to working with President-elect Trump and Congress to strengthen national defense.
Musk did not respond to a request for comment.
Financial implications
The F-35 program represents a significant portion of Lockheed’s business, accounting for about 25% of its sales, according to Jefferies analyst Sheila Kahyaoglu. The program also impacts the broader defense supply chain, contributing 10% of sales at Northrop Grumman, 5% at L3Harris Technologies, and 1% at Honeywell International.
Lockheed is expected to deliver 150 F-35 jets in 2024 and 156 in 2025, with each jet priced at roughly $80 million. The company also generates service and development revenue tied to the program.
Despite Musk’s critique, his own ventures intersect with the defense sector. As CEO of SpaceX, valued at $250 billion, Musk oversees a company that has challenged traditional government contractors like Lockheed. SpaceX COO Gwynne Shotwell recently criticized cost-plus government contracts, advocating for cost-efficiency and performance-based profits.
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Market reaction
Monday’s trading highlighted Musk’s influence. While the S&P 500 and Dow Jones Industrial Average rose 0.3% and 1%, respectively, Lockheed’s stock fell. Defense budgets and geopolitical threats typically drive Lockheed’s performance, but Musk’s public comments have added a new variable for investors to consider.
Since the Nov. 5 presidential election, Lockheed shares have dropped 0.2%, while the S&P 500 has gained 4.5%. However, year-to-date, Lockheed’s stock remains up about 20%.