Can orbital data centers help justify SpaceX’s massive valuation?

At SpaceX He reportedly filed confidential papers For an initial public offering, the company will raise $75 billion at a valuation of $1.75 trillion. According to CEO Elon Musk, orbital data centers will be a big part of SpaceX’s future.

In the last episode of TechCrunch’s Stocks PodcastKirsten Korosek, Sean O’Kane, and I discussed Musk’s vision, as well as other companies pursuing similar goals.

It will take Significant technological development and huge capital expenditure To make orbital data centers a reality, but as Sean noted, with “the opposition happening across the country to data centers in general,” executives like Musk and Jeff Bezos are probably thinking, “the engineering challenge may be less than the social challenge here” on Earth.

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

Shawn: This has been a trend – and I would say a rapidly shaping trend – over the first half of the year to last year, and we have different examples of it. We have SpaceX; I feel like, in some ways, Elon Musk was late to this trend. For now, let’s put aside the actual mechanics and viability of data centers in space. We can talk about that in a second if we want, but…

Kirsten: We have a really good story We’ll link to it in the show notesBy the way. One of our new hires, Tim Fernholz, is amazing. He writes all about physics and its limitations.

Shawn: Yeah, I think it’s a really interesting engineering challenge. It’s a really interesting physics challenge. It’s a really interesting orbital mechanics challenge. But clearly a group of companies and people will try to go after him. (There will be) SpaceX doing it, with some kind of variation on what they’re already working on with their Starlink network.

There’s a startup that came out of Y Combinator, it was originally called Starcloud, and it was actually one of the first companies to try to build a huge business around this, that It just raised $170 million this weektheir evaluation (on) which turned them into unicorn status.

Jeff Bezos is trying to pursue this as well. This is the next-gen version of the competition we’ve seen happen between the Starlink network and Amazon’s Leo satellite network, and Blue Origin has its own satellite network coming online as well in the next couple of years.

So there’s going to be a whole bunch of these events, and it’s like they didn’t happen a year ago. I know the way Elon Musk promotes things. We know he’s allergic to red tape, and he built a data center in Memphis, too. Maybe he now knows the challenges and risks you have to take to avoid this routine.

There’s a lot of opposition happening around the country to data centers in general. And these people say, “We have access to space, so let’s try to do it there.” The engineering challenge may be less than the social challenge here on our planet.

Kirsten: It also creates excitement, doesn’t it? If a company is about to go public and work on data centers in the space, that’s something people can have positive expectations about and ignore the limitations. It feels like the company is working on something that is not old and outdated, but points to the future. Which is really a great strategy when you think about it.

Anthony: Not that Elon Musk is the only one doing this, but he seems to be incredibly successful at saying, “Don’t judge my companies on how much money they’re making now, judge them on these grand visions I can make about what’s going to happen in the future.”

Going back to the point that Sean was making, I think part of what’s interesting is (the question): How does this fit into the broader data center proposition? How does that fit with the opposition and the idea that maybe people won’t be able to build as many data centers?

I don’t think any of us engineers can really evaluate the feasibility of these plans. Sure, it has a tinge of fantasy, but even when they make these plans, it seems like just a drop in the bucket in terms of computational capabilities compared to what they want to build on Earth. So, there seems to be no scenario where this replaces a whole bunch of new data centers on the ground. It’s just kind of (…) complementary to it.

Shawn: The last two things I’ll point out that are front and center for me are, one, we’ve seen a decline in some ways (of) data centers — not just because of opposition, but because maybe we don’t need as much, right? We’re seeing a bunch of maneuvering from some AI labs about, “Okay, maybe we don’t need to rent as much from this company,” or whatever. And if this becomes more true than it was five months ago, will you suddenly lose all this momentum to do something crazy like put data centers in space? Provided it works, even.

The other thing is that the idea of ​​building these massive data centers in space, with all these satellites making up the “data center,” is SpaceX’s work. And I think that’s something unique about them compared to these other companies: they’re primarily a launch company, although they generate a bunch of revenue from Starlink. It’s the vehicle that transports data centers into space. They should book that as revenue for SpaceX.

And so this becomes something that Musk wants, of course – whether it works or not, he’ll eventually have to prove it – but of course he wants to send more and more satellites into space because it represents more revenue for SpaceX. This makes SpaceX look better as a public company. Then, it stumbles along the way until it finds something else to attract investors.