Billionaire Elon Musk, CEO of the newly combined SpaceX and xAI, is exploring the concept of space as the next frontier of data centers that cater to the artificial intelligence boom.
The move comes as it gets harder to find land and energy needed to develop data centers to meet the surging demand for AI, a technology that relies on real estate that has significant amounts of water and so much power it can strain electrical grids.
SpaceX filed an application last month with the Federal Communications Commission for an “orbital data center system” that includes launching 1 million satellites into Earth’s orbit. The plan calls for these satellites to transmit information from data centers in space to Earth.
Musk joins fellow billionaire Jeff Bezos, founder of tech giant and online retailer Amazon and spaceflight services company Blue Origin, as a proponent of data centers in space. Bezos said in October that he sees the potential of developing major data centers beyond the Earth’s atmosphere in the next decade, adding that building data centers in space could “beat the cost of terrestrial data centers in the next couple of decades.”
Musk has merged his rocket and satellite firm SpaceX with his AI tech provider xAI in a deal that values the combined entity at $1.25 trillion. The plan is to build orbital data centers made up of satellites launched by SpaceX and using technology from xAI to help meet the AI data center demand.
Musk’s xAI supercomputer plans on Earth have sparked community and environmental concerns in greater Memphis, Tennessee, with critics saying the project could pose a threat to air and water quality. XAI powers Musk’s chatbot Grok, and the company is one of a handful building data centers to house supercomputers that can process AI functions.
The AI boom and need for real estate and power have data center investors looking at new frontiers they would otherwise not entertain, Michael Rareshide, a partner at Site Selection Group who specializes in data center site selection, told CoStar News.
Space is one of those. Putting data centers into space is an unproven frontier not many in the day-to-day data center industry are considering, with steep technological hurdles including in-space construction that meets safety regulations and transmitting data from space back to Earth.
Not expected soon
“It’s hard to imagine data centers in space in the near term,” said Rareshide, who helps major AI users and data center developers find sites but isn’t directly involved with Musk’s plans. He notes that a number of data center operators are focused on finding the real estate they need on Earth in the next 18 to 24 months.
This latest move by Musk shows where the AI boom could be headed next with the rapid rise of AI already reshaping the landscape for data center hot spots in the United States. Florida, prone to hurricanes, wasn’t initially considered a desirable location for data centers, while North Dakota and South Dakota were considered by some as too remote — but not so anymore.
“A year ago, no one would’ve considered building a data center in Florida, but now places like Florida, the Dakotas and elsewhere are being considered as the AI boom pushes data center construction to new frontiers,” Rareshide said.
Rural areas are getting transformed across the United States as real estate and technology firms seek sparsely populated regions with little competition for the energy and cooling waters needed to power the AI boom.
Power is the top constraint for new data center development, said Curt Holcomb, vice chairman and a data center leader at real estate services firm JLL, who has been following Musk’s plans.
“Musk said they could have something operational in the next 30 [to 36 months], which, I’ve followed Elon enough that I wouldn’t bet against him,” said Holcomb, who added he didn’t know the details on how Musk would achieve the goal.
“This is further into the future and is a great thing to talk about with energy being derived from solar and fuel cells into something that could potentially work,” Holcomb added.
Engineering challenges
Plans for Musk’s orbital data centers would be the most cost- and energy-efficient way to operate a data center, SpaceX said in its FCC application. The application process is ongoing, but Musk said in a podcast this month that within the next 30 to 36 months, “the most economically compelling place to put AI will be space.”
One executive with Starcloud said an FCC filing in support of SpaceX’s application that “orbital data centers address the growing difficulty of scaling terrestrial data centers in a timely, cost-effective, and environmentally responsible manner.”
Proximity to solar power seems to be a big driver in considering data centers in space, Rareshide said.
But launching data center development into orbit brings other challenges that Musk — and his team — would need to address. They include building a modular-type data center that astronauts could assemble like Legos, developing battery solutions and building orbital satellites in lieu of a fiber network, Rareshide said.
Robert Child, an executive vice president of data center development at KDC, which builds data centers, said Musk’s biggest hurdle is likely going to be capital. “Getting that much infrastructure into orbit” will require a “significant lift from a capital standpoint.”
SpaceX and xAI didn’t respond to media requests from CoStar News for more information about the designs of the data centers.
Power and investment needed
Before a data center in space could become operational, SpaceX would need buy-in from clients, with “behind the meter” power solutions — that is, energy generation or storage that is handled on-site rather than relying on a traditional power grid.
That technology is only recently starting to gain traction as concerns over reliability begin to dissipate, Rareshide said. Rareshide doesn’t expect other big data center developers, such as Microsoft or Digital Realty, to be headed into space in the near future.
“By having a data center up there and beaming down information, what does that accomplish?” he said, adding he doesn’t see an immediate benefit.
That being said, Rareshide said if anyone can figure out how to operate data centers in space, it could be Musk, who created Starlink, a satellite-based internet service that can operate almost anywhere. Bezos’ Blue Origin also launched thousands of satellites in orbit to compete with Starlink.
If Musk figures out how to place a data center into space, Rareshide said he would expect Bezos to follow suit in launching a similar venture into orbit.
“I think most people are going to let Elon do a proof of concept before they head to space,” he added. “Everybody is scrambling to figure out where they can put more power” on Earth “versus coming up with new solutions” that are outside the box. “It’s a madhouse with the utilities right now” with everyone trying to find power and utility companies that can get resources to sites.