Orbital data centers could be key to SpaceX's valuation

SpaceX has reportedly submitted confidential documents for an IPO, aiming to raise $75 billion at a $1.75 trillion valuation. CEO Elon Musk has indicated that orbital data centers will play a major role in SpaceX's future.

In the latest episode of TechCrunch's Equity podcast, Kirsten Korosec, Sean O'Kane, and I explored Musk's vision along with other companies chasing similar ambitions.

Making orbital data centers a reality will require substantial technological development and massive capital investment. However, as Sean noted, with growing opposition to data centers across the country, executives like Musk and Jeff Bezos may see the engineering challenge as less daunting than the social hurdles on Earth.

Below is an edited preview of our conversation, condensed for clarity and length.

Sean: This has been a trend — a rapidly forming one, I'd say — over the past six to twelve months, and we have several examples. SpaceX is one, though in some ways Elon Musk seems late to this trend. For now, let's set aside the actual mechanics and feasibility of space-based data centers. We can dive into that later if needed.

Kirsten: We have an excellent story we'll link in the show notes. One of our newest hires, Tim Fernholz, is fantastic — he covers the physics and constraints thoroughly.

Sean: Yeah, it's a fascinating engineering, physics, and orbital mechanics challenge. But clearly many companies and individuals are going to pursue it. SpaceX will be among them, building on what they're already doing with Starlink.

There's a Y Combinator-backed startup, originally called Starcloud, that was one of the first to try building a large business around this. It just raised $170 million this week, pushing its valuation to unicorn status.

Jeff Bezos is also pursuing this. It's a next-generation version of the competition between Starlink and Amazon's LEO satellite network, and Blue Origin will have its own satellite network operational in the next few years.

So a lot of activity is emerging, and it feels like this wasn't happening a year ago. Elon Musk's pitch — he's known to hate bureaucracy, and he's already built a data center in Memphis. Perhaps now he understands the challenges and risks needed to bypass red tape.

There's widespread opposition to data centers across the country. Some say, 'We have space access, so let's try doing it up there.' The engineering challenge might be easier than the social challenge back on Earth.

Kirsten: It also generates excitement. If a company is about to go public and working on space data centers, people can have positive expectations and overlook the constraints. It signals a forward-looking company, not one stuck in the past. It's a smart strategy.

Anthony: Elon Musk isn't the only one using this approach, but he's remarkably effective at saying, 'Don't judge my companies by current profits; judge them by the grand visions I paint of the future.'

Returning to Sean's point, what's interesting is how this fits into the broader data center rollout and opposition. Maybe people won't be able to build as many data centers as they want. None of us are engineers qualified to assess these plans' viability. There's certainly a fantasy element, but even when plans are laid out, they seem like a drop in the bucket compared to Earth-based compute needs. So it's unlikely this replaces many new Earth data centers; rather, it's a supplement.

Sean: Two things stand out to me. First, we've seen some pullback from data centers — not only due to opposition but also because demand might be lower. AI labs are jockeying, saying they might not need to lease as much from certain companies. If that trend solidifies compared to five months ago, do we lose momentum for something as extreme as space data centers, even if they work?

Second, building massive space data centers with satellites that constitute the 'data center' is business for SpaceX. Unlike other companies, SpaceX is primarily a launch company, even though Starlink generates revenue. They are the vehicle that delivers data centers to space, and they can book that as revenue.

So of course Musk wants to send more satellites into space — whether it works or not, he'd eventually have to prove it — because it generates more revenue for SpaceX, making it look better as a public company. Then the cycle continues until he finds the next thing to pitch to investors.

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