Why the economics of orbital AI are so brutal Tim Fernholz 10:15 AM PST · February 11, 2026 In a sense, this whole thing was inevitable. Elon Musk and his coterie have been talking about AI in space for years — mainly in the context of Iain Banks’ science-fiction series about a far-future universe where sentient spaceships roam and control the galaxy.
Now Musk sees an opportunity to realize a version of this vision. His company SpaceX has requested regulatory permission to build solar-powered orbital data centers, distributed across as many as a million satellites, that could shift as much as 100 GW of compute power off the planet. He has reportedly suggested some of his AI satellites will be built on the moon.
“By far the cheapest place to put AI will be space in 36 months or less,” Musk said last week on a podcast hosted by Stripe co-founder John Collison.
He’s not alone. xAI’s head of compute has reportedly bet his counterpart at Anthropic that 1% of global compute will be in orbit by 2028. Google (which has a significant ownership stake in SpaceX) has announced a space AI effort called Project Suncatcher, which will launch prototype vehicles in 2027. Starcloud, a startup that has raised $34 million backed by Google and Andreessen Horowitz, filed its own plans for an 80,000 satellite constellation last week. Even Jeff Bezos has said this is the future.
But behind the hype, what will it actually take to get data centers into space?
In a first analysis, today’s terrestrial data centers remain cheaper than those in orbit. Andrew McCalip, a space engineer, has built a helpful calculator comparing the two models. His baseline results show that a 1 GW orbital data center might cost $42.4 billion — almost 3x its ground-bound equivalent, thanks to the up-front costs of building the satellites and launching them to orbit.
Changing that equation, experts say, will require technology development across several fields, massive capital expenditure, and a lot of work on the supply chain for space-grade components. It also depends on costs on the ground rising as resources and supply chains are strained by growing demand.
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Consider that the reusable Falcon 9 delivers, today, a cost to orbit of roughly $3,600/kg. Making space data centers doable, per Project Suncatcher’s white paper, will require prices closer to $200/kg, an 18-fold improvement that it expects to be available in the 2030s. At that price, however, the energy delivered by a Starlink satellite today would be cost competitive with a terrestrial data center.
The expectation is that SpaceX’s next-generation Starship rocket will deliver those improvements — no other vehicle in development promises equivalent savings. However, that vehicle has yet to become operational or even reach orbit; a third iteration of Starship is expected to make its maiden launch sometime in the months ahead.
Even if Starship is completely successful, however, assumptions that it will immediately deliver lower prices to customers may not pass the smell test. Economists at the consultancy Rational Futures make a compelling case that, as with the Falcon 9, SpaceX will not want to charge much less than its best competitor — otherwise the company is leaving money on the table. If Blue Origin’s New Glenn rocket, for example, retails at $70 million, SpaceX won’t take on Starship missions for external customers at much less than that, which would leave it above the numbers publicly assumed by space data center builders.
“There are not enough rockets to launch a million satellites yet, so we’re pretty far from that,” Matt Gorman, the CEO of Amazon Web Services, said at a recent event. “If you think about the cost of getting a payload in space today, it’s massive. It is just not economical.”
Still, if launch is the bane of all space businesses, the second challenge is production cost.
“We always take for granted, at this point, that Starship’s cost is going to be hundreds of dollars per kilo,” McCalip told TechCrunch. “People are not taking into account the satellites are almost $1,000 a kilo right now.”
Satellite manufacturing costs are the largest chunk of that price tag, but if high-powered satellites can be made at about half the cost of current Starlink satellites, the numbers start to make sense. SpaceX has made great advances in satellite economics while building Starlink, its record-setting communications network, and the company hopes to achieve more through scale. Part of the reasoning behind a million satellites is undoubtedly the cost savings that come from mass production.
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