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SpaceX has confidentially submitted IPO documents, seeking to raise $75 billion and potentially valuing the company at $1.75 trillion. CEO Elon Musk has indicated that space-based data centers will be a significant component of SpaceX’s future operations.

In a recent installment of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I explored Musk’s concept and the efforts of other companies with similar objectives.

Achieving orbital data centers demands substantial technological advancement and immense financial investment. However, as Sean observed, given the “widespread opposition to data centers across the country,” leaders such as Musk and Jeff Bezos might perceive the “engineering hurdles as less formidable than the societal challenges” on Earth.

Below is an abridged and clarified excerpt from our discussion.

Sean: This has emerged as a swift trend over the past six to twelve months, exemplified by various players. SpaceX is one such example, though I believe Elon Musk entered this arena somewhat belatedly. For now, let’s defer discussion of the practicalities and feasibility of in-orbit data centers, which we can address momentarily, but –

Kirsten: Incidentally, we have an excellent article that we’ll include in the show notes. Tim Fernholz, one of our newest team members, is exceptional and provides a comprehensive overview of the physics and limitations involved.

Sean: Indeed, it presents a compelling engineering, physics, and orbital mechanics challenge. Nevertheless, it’s an endeavor many companies and individuals are evidently pursuing. SpaceX will be involved, adapting aspects of their existing Starlink network.

A Y Combinator startup, initially named Starcloud, was among the first to aim at developing a major business in this sector. They recently secured $170 million this week, pushing their valuation past unicorn status.

Jeff Bezos is also venturing into this space. This represents a new phase of the rivalry observed between Starlink and Amazon’s Leo satellite network, with Blue Origin also launching its own satellite network in the coming years. A surge of activity is expected, which was not evident even a year ago. Elon Musk’s approach—given his known aversion to bureaucracy and his experience building a data center in Memphis—suggests he’s now aware of the obstacles and risks involved in circumventing such regulations.

With significant nationwide resistance to data centers generally, proponents argue, “Since we have access to space, let’s establish them there.” The technical difficulties might prove less daunting than the social resistance faced on Earth.

Kirsten: Furthermore, it generates enthusiasm, doesn’t it? For a company nearing its IPO, the prospect of developing space-based data centers can foster positive anticipation, allowing people to overlook the limitations. It portrays a company engaged in forward-thinking innovation rather than obsolete practices. Strategically, it’s quite brilliant.

Anthony: While Elon Musk isn’t unique in this, he’s remarkably adept at conveying, “Evaluate my companies not by their current profitability, but by the ambitious future visions I articulate.” Reverting to Sean’s point, an interesting consideration is how this initiative aligns with wider data center deployment, especially given public opposition and potential restrictions on new data center construction. None of us are engineers qualified to fully assess the feasibility of these proposals. They admittedly have a touch of fantasy, yet even when presented, their projected compute capacity seems negligible compared to Earth-based aspirations. Thus, it appears improbable that space data centers would replace numerous terrestrial ones; rather, they might serve as a mere complement.

Sean: Two critical points for me are: First, there’s been a partial slowdown in data center development, not solely due to public opposition but also potentially because demand isn’t as high as anticipated. We’re observing AI labs negotiating, questioning whether they truly need to lease so much capacity. If this trend solidifies, would it undermine the drive for ambitious projects like orbital data centers, even assuming their functionality? Second, constructing vast space-based data centers, comprising numerous satellites, creates direct business for SpaceX. Distinct from other companies, SpaceX’s primary role is launching, despite significant Starlink revenue. They provide the means to deploy these data centers into space, booking that as revenue. Consequently, Musk naturally seeks to launch more satellites—he would eventually need to demonstrate their efficacy—because it boosts SpaceX’s revenue, enhancing its appeal as a public entity. This cycle continues until he identifies another concept to present to investors.