A proposed merger between Elon Musk’s SpaceX and artificial intelligence startup xAI could accelerate Musk’s bold vision of launching AI data centres into orbit, as competition intensifies with tech giants such as Google, Meta and OpenAI, according to a Reuters exclusive on Thursday.
The potential tie-up could provide both the technological infrastructure and financial backing needed to pursue space-based AI computing, a concept still in its early stages but increasingly viewed as a possible solution to the soaring energy demands of artificial intelligence.
What Are Space-Based AI Data Centres?
Space-based AI data centres would rely on hundreds of solar-powered satellites linked together in orbit, designed to handle the immense computing needs of advanced AI systems such as xAI’s Grok or OpenAI’s ChatGPT.
Supporters argue that operating data centres in space offers major advantages over Earth-based facilities. Satellites receive near-constant solar energy, eliminating reliance on power grids, while the vacuum of space removes the need for energy-intensive cooling systems—one of the biggest costs of traditional data centres.
However, engineers and space experts caution that commercial viability is still years away. Major challenges include space debris, exposure to cosmic radiation, limited ability to repair or upgrade hardware in orbit, and the high cost of launches.
According to Deutsche Bank, the first experimental orbital data centres could be deployed between 2027 and 2028. If successful, much larger satellite constellations—possibly numbering in the thousands—may emerge in the 2030s.
Why Elon Musk Is Betting on AI Computing in Space
SpaceX already operates the world’s most extensive satellite network through Starlink, giving Musk a significant advantage in deploying and managing large satellite constellations.
If AI computing shifts to orbit, SpaceX’s launch capabilities and satellite experience could position it as the backbone of space-based data infrastructure. Musk himself has been vocal about the idea.
“It’s a no-brainer building solar-powered 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.
Reuters has also reported that SpaceX is considering an initial public offering this year, potentially valuing the company at over $1 trillion. Sources say part of the IPO proceeds could be directed toward developing AI-focused satellite data centres.
What Are Musk’s Rivals Doing?
Musk is far from alone in exploring space-based AI infrastructure.
- Jeff Bezos’ Blue Origin is researching orbital data centres, building on Bezos’ prediction that gigawatt-scale space data centres could outperform Earth-based ones within 10 to 20 years by harnessing uninterrupted solar power and radiating heat directly into space.
- Starcloud, backed by Nvidia, recently launched Starcloud-1, a satellite carrying an Nvidia H100 chip—the most powerful AI processor ever placed in orbit. The satellite is currently training and running Google’s open-source Gemma AI model as a proof of concept. The company ultimately envisions a satellite “hypercluster” capable of delivering five gigawatts of computing power, rivaling multiple hyperscale data centres combined.
- Google is pursuing its own effort through Project Suncatcher, aiming to network solar-powered satellites equipped with Tensor Processing Units (TPUs) into an orbital AI cloud. An initial prototype launch is planned around 2027 with partner Planet Labs.
- China has also announced plans to build a “Space Cloud”, launching space-based AI data centres over the next five years. State media said China’s main space contractor has committed to developing gigawatt-class digital intelligence infrastructure in orbit as part of a long-term strategy.
The Bigger Picture
As artificial intelligence drives unprecedented demand for computing power and electricity, space-based AI data centres are emerging as a radical alternative. While the concept remains experimental, Musk’s potential SpaceX–xAI merger could place him at the forefront of a technological shift that may redefine how and where AI is powered.