The numbers matter. The thermal budget a satellite is an tightly controlled thing. Large modern ones are in the order of a few to a couple of 10s of kilowatts, so something like a few to several low 10s of modern GPU compute power. Even with thousands of yet to be designed or launched satellites, it's going to have trouble competing with even a single current DC, plus it is in SAPCE for some reason, so everything is more expensive for lots of reasons.

> it's going to have trouble competing with even a single current DC

This looks like a valid argument to me, yes. Elon mentioned 1,000,000 satellites - I'm thinking about 3rd version of Starlink as a typical example, 2 tons, 60 satellites per Starship launch, 16,000 Starship launches for the constellation, comparing with 160 launches per year of today's Falcon 9...

The argument about problems of dissipating heat still stands - I don't see a valid counterargument here. Also "SAPCE" problem looks different from the point of view of this project - https://www.50dollarsat.info/ . Basically, out launch costs go way down, and quality of electronics and related tech today on Earth is high enough to work on LEO.