Why does Elon Musk want to put AI data centres in space?

A proposed merger between Elon Musk’s SpaceX and xAI, reported exclusively by Reuters on Thursday, ​could give fresh momentum to Musk’s plan to launch satellite data centers into orbit

A proposed merger between Elon Musk’s SpaceX and xAI, reported exclusively by Reuters on Thursday, ​could give fresh momentum to Musk’s plan to launch satellite data centres into orbit ‌as he battles for supremacy in the rapidly escalating AI race against tech giants ​like Alphabet’s Google, Meta and OpenAI.

Space-based data centres, still an early-stage concept, would likely rely on hundreds of solar-powered satellites networked in orbit to handle the enormous computing demands of AI systems like xAI’s Grok or OpenAI’s ChatGPT, at a time when energy-hungry Earth-based facilities are becoming increasingly costly to run. Advocates say operating above the atmosphere offers nearly constant solar power and eliminates the cooling burdens that dominate ground-based data-centre ​costs, potentially making AI processing far more efficient.

But engineers and space specialists caution that commercial viability ⁠remains years away, citing major risks from space debris, defending hardware against cosmic radiation, limited options for in-person maintenance, and launch costs. Deutsche Bank expects the first small-scale orbital data-centre deployments in 2027–28 to test both the technology and the economics, with wider ​constellations — potentially scaling into the hundreds or thousands— ⁠emerging only in the 2030s if those early missions work.

SpaceX is the most successful rocket-maker in history and has successfully launched thousands of satellites into orbit as part of its Starlink internet service. If space-based AI computing is the future, SpaceX is ‌the most ideally placed to operate AI-ready satellite clusters or facilitate the setting up of on-orbit ‌computing. “It’s a no-brainer building solar-power data centres in space ... the lowest-cost place to put AI will be space, and that will be true within two years, ‍three at the latest,” Musk said at the World Economic Forum in Davos earlier this month.

SpaceX is considering an initial public offering this year that could value the rocket and satellite company at over $1 trillion, Reuters ‍has reported. Part of the proceeds would go to funding the development of AI data centre satellites, sources say.

Jeff Bezos’ Blue Origin has been working on technology for AI data centres in space, building on the Amazon founder’s prediction that “giant gigawatt data centers” in orbit could beat the cost of their Earth-bound peers within 10 to 20 years by tapping uninterrupted solar power and radiating heat directly into space.