Will an orbital data center help justify SpaceX’s huge valuation?

SpaceX has reportedly filed confidential documents for an initial public offering that would raise $75 billion at a valuation of $1.75 trillion. And CEO Elon Musk says orbital data centers will be a big part of SpaceX’s future.

On the latest episode of TechCrunch’s Equity podcast, Kirsten Kolosek, Sean O’Kane, and I discussed Musk’s vision and other companies pursuing similar goals.

Making orbiting data centers a reality would require significant technological development and huge capital investments, but as Sean pointed out, “there is a movement across the country against data centers in general,” and executives like Musk and Jeff Bezos may be thinking that “the engineering challenges may be smaller than the social challenges here on Earth.”

Read a preview of the conversation below, edited for length and clarity.

Sean: This is a trend that has been rapidly forming over the last six months to a year, and there are many examples. We have SpaceX. In some ways, I feel like Elon Musk missed this trend. And for now, let’s leave aside the actual mechanics and survivability of data centers in space. If you want, we can talk about that right away, but—

Kirsten: By the way, there’s a really good story that I’ll link to in the show notes. One of our recent hires, Tim Fernholtz, is amazing. He writes all about physics and its constraints.

Sean: Yeah, I think this is a very interesting engineering challenge. This is a really interesting physics challenge. This is a really interesting orbital mechanics challenge. But it’s clearly something that a lot of companies and people are trying to pursue. [There’s] SpaceX will be doing that, but it’s kind of different from what they’re already doing with the Starlink network.

There’s a startup that came out of Y Combinator, originally called Starcloud, that’s actually one of the first companies that’s going to build a huge business around this, and they just raised $170 million this week, at their valuation. [on] That tipped them into unicorn status.

Jeff Bezos is also trying to pursue this. This is the next generation version of the competition going on between Starlink and Amazon’s Leo satellite network, with Blue Origin also planning to bring its own satellite network online in the next few years.

So a lot of this stuff is going to happen, and it feels like it wasn’t happening a year ago. I understand how Elon Musk sells himself. We know he’s allergic to red tape, and he’s even built a data center in Memphis. Perhaps he understands the challenges and risks involved in getting around that red tape.

There are many protests across the country against data centers in general. And these people say, “We have access to space, so let’s do it there.” The engineering challenge may be smaller than the social challenge here. [planet].

Kirsten: And it also creates excitement, right? If the company is about to go bankrupt [public] They are working on a data center in space, which is something people can look forward to in a positive way, ignoring the constraints. It feels like a company working on something that hints at the future, rather than being old and outdated. And when you think about it, this is a really great strategy.

Anthony: Elon Musk isn’t the only one who does this, but he seems to be incredibly successful at saying, “Don’t judge my company by how much money it makes now. Judge it by the grand vision I have of what’s going to happen in the future.”

Going back to the point Sean was making, I think part of the interesting thing is: [ask]: How does this fit in with broader data center deployment? How does it fit in with the opposition and the idea that people can’t build as many data centers as they want?

I don’t think any of us are engineers who can really evaluate the feasibility of these plans. It certainly has a tinge of fantasy, but even if they develop these plans, it feels like they’re just a drop in the bucket in terms of computing power compared to what they want to build on Earth. So I don’t feel like there’s a scenario where this replaces a large number of new data centers on the planet. it’s kind of […] I’ll supplement that.

Sean: The last two things that are important to me are, one, we’re seeing a setback in some ways. [from] Data centers — not just because of the opposition, but because we probably don’t need that much, right? There’s a lot of banter in some AI labs about, “Well, maybe we don’t need to lease this much money from this company.” And if that’s truer now than it was five months ago, will we suddenly lose momentum for doing something wild like putting data centers in space, even provided it works?

The other thing is that SpaceX’s business is the idea of ​​using all these satellites to build massive data centers in space, literally forming “data centers.” And I think this is unique to them compared to other companies. Despite making a lot of money from Starlink, they are primarily a start-up company. These are the means to transport data centers into space. They will record it as revenue for SpaceX.

And, of course, this is what happens. [Musk] He wants to – he’ll have to prove it eventually, whether it works or not – but of course he wants to send more and more satellites into space. Because it means more revenue for SpaceX. And that makes SpaceX look better as a publicly traded company. And you kind of roll down the road until he finds something else to pitch to investors.