We need more competition [1] in orbital launch and orbital internet. Backing SpaceX alone when they have the lead will not lead to a good outcome.
I'd imagine that there are also concerns about the close ties Musk has to the Russians and how he's tried to insert himself into the Ukrainian conflict on numerous occasions.
[1] Not the largess of traditional government contractors Lockheed and Boeing, but the plethora of startups entering into this space.