Elon Musk is right, except for his arbitrary identification of physical reality with “base reality.” Take that away, and there is no real philosophical problem. It does not matter whether what we perceive is mental or physical in origin. Ask Bishop Berkeley. Material reality is an unnecessary assumption, and in the end, as Musk points out, an untenable one.
All that really matters is whether God exists. If he does, we can be confident that our experience is ultimately meaningful. If he does not, it equally does not matter whether we perceive “base reality” or some computer simulation: either way, nothing means anything.