These space stocks could benefit from Elon Musk's latest AI obsession

By William Gavin

The latest solution to energy crunch fueled by the AI race - send data centers into space

SpaceX is set to be among the leaders pursuing space-based artificial-intelligence data centers.

The latest craze in the space business is the promise of orbital data centers, which could provide a solution to artificial-intelligence hyperscalers' energy problem. A slew of companies stand to benefit.

The most obvious is Elon Musk's SpaceX, which dominates the rocket-launch industry and already has a plan to upgrade its next-generation satellites to serve as a type of data center. SpaceX plans to go public as soon as next year and expects to use some of the funds from its listing to develop its plans, Bloomberg News reported this month.

Musk, like other proponents of the idea, argues that orbital AI data centers are the ideal fix for a number of problems companies have with traditional data centers. That includes regulatory red tape, high energy costs, environmental concerns and limited available land.

And as companies race to be at the forefront of the AI boom, securing access to computing power through data centers is part of what will set competitors apart.

See more: Elon Musk suggests this underrated AI business could be a big driver of SpaceX's valuation

While SpaceX is set to be an industry leader in the effort to develop that technology to create data centers in space, it's not alone. According to Deutsche Bank, at least four public companies are positioned to benefit if interest persists.

That includes Planet Labs (PL), which is working with Alphabet (GOOG) (GOOGL) on Project Suncatcher, an experimental plan to create compact constellations of solar-powered satellites carrying Google's advanced tensor processing units. They plan to send two prototypes to orbit by early 2027.

There's also Rocket Lab (RKLB), which Deutsche Bank said can support the deployment of data-center satellites in a couple of ways: It can both make satellites at scale and make some components, such as solar panels, in-house.

Read more: These two space stocks could rise 70% as government work heats up, analyst says

Plus, the company can launch satellites into low-Earth orbit - where most of these vehicles are expected to operate - through its Neutron reusable rocket, which is still undergoing testing. Rocket Lab expects the debut flight of the medium-lift rocket to happen next quarter.

Another potential winner of the race for space-based computing is Intuitive Machines (LUNR), which plans to complete its acquisition of Lanteris Space Systems in early 2026. The Deutsche Bank team noted that Lanteris has experience building satellites that require massive amounts of power and heat dissipation, which could give it an edge.

There's also a growing array of startups that could benefit from interest in space-based data centers, such as Nvidia (NVDA)-backed Starcloud, which sent a satellite equipped with an H100 graphics processing unit to space last month. AetherFlux, a renewable-energy company, said recently it aims to launch a satellite constellation that it calls "Galactic Brain" into orbit in early 2027.

"The race for artificial general intelligence is fundamentally a race for compute capacity, and by extension, energy," Aetherflux CEO Baiju Bhatt, who also helped found Robinhood (HOOD), said in a statement last week.

"The elephant in the room is that our current energy plans simply won't get us there fast enough," he added.

The technology is still impractical and expensive

While there's definitely a market for companies that can build data centers in space, there are still a number of issues with the technology that need to be ironed out before it becomes widespread.

See more: Why Musk and other tech leaders think outer space can help solve one of AI's biggest challenges

Space radiation can accelerate the degradation of chips, thermal management is still tricky and rocket launches are still very expensive, according to the Deutsche Bank analysts. Maintenance is also "impractical," they noted, which will likely mean satellites will need better, more expensive hardware to make data centers viable.

And the economics just don't add up, at least in the short term.

Andrew McCalip, the head of research and development at Varda Space Industries, on Monday published an adjustable model that shows orbital data centers are likely three or four times more expensive than those built on Earth.

"[I]t's not obviously stupid, and it's not a sure thing," McCalip wrote. "If you run the numbers honestly, the physics doesn't immediately kill it, but the economics are savage."

Costs are expected to improve over time, but it could take several years. Alphabet expects it to take about a decade for launch costs to fall below $200 per kilogram, which would make launch and operating costs "roughly comparable" to the energy costs of a data center on Earth.

Jeff Bezos, whose Blue Origin has reportedly been working on orbital data centers for more than a year, has said it will take the next few decades to beat the cost of terrestrial data centers.

-William Gavin

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12-15-25 1541ET