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DATA CENTERS WITH WINGS ARE THE TALK OF THE TOWN

Just when it feels like Big Tech's artificial intelligence ambitions cannot get taller, it appears that the sky is the limit. Literally!

"We have seen investor questions on orbital data centers increase over the last few weeks. While there are high technical barriers to overcome, the concept has gained momentum," BofA analysts led by Andrew Obin said in a note dated late December.

The brokerage, citing Google and Starcloud, said electricity is the single biggest operating cost for data centers and that access to higher, continuous solar irradiance in space could push power costs toward zero. But launch and maintenance costs are likely to be significant, it added.

Because space is a vacuum, satellites cannot shed heat by convection, requiring large radiators to cool chips. In low Earth orbit, those radiators and solar panels add drag, forcing satellites to expend propellant to maintain altitude. Greater radiation exposure can also cause earlier chip failures, making repairs far harder than on Earth, BofA said.

BofA noted SpaceX’s Falcon Heavy launch costs of about $3,600 per kilogram, while Google estimates costs may need to fall toward $200/kg for orbital data centers to be competitive with terrestrial facilities.

According to BofA there are currently five companies exploring this venture.

Starcloud, a Washington-based company and funded by venture capitalists, launched a satellite with a Nvidia H100 chip in November and has successfully run an open-source large language model in space. The next launch, featuring more chips is due in October 2026.

California-based Aetherflux has received U.S. funding and is planning for a power beaming satellite this year, while a commercial data center launch is scheduled in 2027.

Elon Musk's SpaceX, which is expected to go public this year, Jeff Bezos' Blue Origin and Google are other major players in this space, with the latter planning two AI chip-integrated satellites early next year.

"Putting data centers in space is not a fantasy — it is a radical answer to a very earthly problem: energy and heat," said John Plassard, head of investment strategy at Switzerland-based Cite-Gestion.

"The real question is not whether the idea is brilliant, but when it becomes profitable — and who captures the value first."

BofA sees no risk to companies currently involved in cooling and electricity such as Eaton ETN.N, Vertiv VRT.N and Johnson Controls JCI.N, but the exploration of extraterrestrial data centers could benefit space companies such as Rocket Lab RKLB.O that the brokerage rates "buy".

(Johann M Cherian)

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