Orbital data centers’ feasibility gap is a governance risk

While regulators struggle to establish rules for data centers across the country, some companies are offering a new solution for land limitations on Earth by launching orbital data centers. Multiple developers have pitched the idea of orbital data centers as a solution to terrestrial power grid constraints and community backlash that limit the expansion of artificial intelligence (AI), with some tech leaders speculating they could be launched in just a few years.

Unsurprisingly, one of the biggest proponents of orbital centers is Elon Musk, the founder of SpaceX. Musk’s landmark initial public offering (IPO) filings reveal the billionaire’s vision: to create “the most ambitious, vertically integrated innovation engine on (and off) Earth with unmatched capabilities to rapidly manufacture and launch space-based communications that connect the world.” For SpaceX and its business units, orbital data centers are central to powering the company’s projected growth and increasing reliance from competitors—the innovation was even featured prominently in SpaceX’s stunning $1.5 trillion valuation. Despite the liberatory potential that Musk intends to capitalize on through orbital data centers, it’s unclear whether the innovation is scientifically feasible. What is clear, however, is that SpaceX and others can exploit regulatory gaps to serve their financial interests unless space communication policy catches up with the market.

The physics problem

Data centers are physical facilities that house high-throughput computers to process large amounts of data on behalf of public and private organizations. Though they power much of our activity online, AI companies like Musk’s xAI, Google, Microsoft, OpenAI, and Anthropic rely on data centers to efficiently process user requests and are seeking more compute for the anticipated adoption of the technology.

On Earth, data centers can span multiple football fields in size and require immense amounts of electricity and water, leading communities to push back against construction in their area.

While putting the facilities in space could ease these intensive needs, researchers question the feasibility of cooling large-sized data centers in space. Terrestrial data centers utilize both air cooling and server liquid cooling to dispel heat through conduction and convection. They transfer heat from the chips to liquid coolant, then from this coolant to the volume of atmosphere surrounding the plant. This cooling strategy is almost impossible for a data center floating in the vacuum of space given that there is no atmosphere to absorb the heat. In fact, thermal radiation may be the only way to dissipate the heat generated by orbital data centers, but some scientists have calculated that properly expelling the heat from a single orbital data center using this method would require 2.15 million square feet of radiators.

But cooling isn’t the only obstacle to putting data centers in space. The lack of atmosphere exposes space-bound objects to much higher doses of the sun’s ultraviolet rays, which can degrade radiator infrastructure, limiting the technology’s performance and lifespan. General maintenance difficulties in space, infrastructure size and weight, and economic costs similarly decrease the possible deployment of orbital data centers—not to mention the increased likelihood of orbital collisions given the growing number of satellites in space.

Even so, SpaceX’s near $3 trillion valuation achieved in the company’s first few days of stock market trading shows investors think there is real potential to the idea, despite no clear technical proof of concept.

The regulatory challenge

There also is a regulatory consideration in the SpaceX filing. Unlike with legacy developments in satellite communication, such as the Communications Satellite Act of 1962, today’s regulatory environment lacks the interagency coordination necessary for ensuring space communications claims are rigorously assessed. A host of government agencies currently regulate satellite communication; the Federal Communication Commission (FCC) is responsible for spectrum management and licensing, the Federal Aviation Administration (FAA) monitors launch activities, and the National Telecommunications and Information Administration (NTIA) liaises between the FCC and other agencies to protect federal communication satellite systems. Other agencies, like the Federal Trade Commission (FTC), the White House Office of Science and Technology Policy, and NASA likewise contribute to federal space communication matters. While the private sector has rushed to substantiate the Trump administration’s call for commercial development in the new space economy, these regulatory silos stagnate policymaking, enabling unfettered technological expansion without proper oversight.

SpaceX’s strategic invocation of orbital data centers in the company’s June 12 IPO sets a risky competition policy precedent for future developments in the space communication sector. There is an issue of whether space communication companies, like SpaceX, may present the “illusion of a solution” to justify high stock valuations and thereby create problems for competitors. In a highly concentrated market like space communication, where vertically integrated companies like SpaceX monopolize satellite launches and services, claiming the ability to develop orbital data centers increases its market power and could overwhelm competitors. Starlink’s main rivals, OneWeb and Amazon Leo already rely on SpaceX’s launch infrastructure. If Musk succeeds in creating the world’s first constellation of orbital data centers, tech competitors may be forced to rely on the company for off-world power generation. Anthropic, now the most valuable AI startup, has already expressed interest in the prospect of orbital data centers through a recent partnership with SpaceX—and it’s not the only one. Google, which was an early investor in Musk’s SpaceX, is similarly in talks with SpaceX to develop orbital data centers. It’s paradoxical that AI companies like Anthropic, which claim to prioritize safety, are so willing to buy into SpaceX’s illusion. As AI development continues, it’s imperative that decisionmakers consider how to offset the technology’s possible environmental degradation. Untested ideas like Musk’s orbital data centers might not be the solution. Experts claim that orbital data centers may be an exercise in “greenwashing” and that having 1 million satellites in orbit will ruin the night sky, generate more space-junk, and increase the risk of orbital collisions—not to mention the potential negative environmental consequences of more frequent launch and reentry activities.

The rationale driving SpaceX and others’ pursuit of orbital data centers is clear, but without proper governance by domestic and international regulators, the pursuit of orbital data centers could cause more harm than good. Researchers warn that overreliance on SpaceX and others reproduces dynamics originally observed in 17th-century chartered trading companies, which capitalized on regulatory gaps to dominate critical infrastructure and exert influence over diplomatic affairs.

The need for improved space governance

If regulation is to catch up with the rate of innovation, policymakers must ditch the assumption that shareholder investment automatically means public approval. Already, the biggest winners from SpaceX’s IPO include venture capital firms, Silicon Valley moguls, SpaceX and Tesla executives, and competing firms like Google. It’s clear that companies like SpaceX are beholden not to everyday citizens, but to their closest supporters and investors.

However, the market shouldn’t be the only driver of progress. From the beginning, space communication technology was meant to serve the public interest, and this principle must guide regulatory intervention. To prevent a monopolization of the space economy, U.S. regulatory agencies need to cooperate on a space communication task force that critically examines emerging trends and market dynamics, environmental considerations, and the technological feasibility of proposed innovations.

The ongoing expansion of space communication technology can’t be based on untested solutions. The U.S. should work alongside global partners to improve space governance, and to limit domestic oversight, policymakers must take seriously the anticompetitive behavior of major actors in the space communication market. Similarly, decisionmakers should consider how emerging market trends impact everyday citizens and act in accordance with the public’s interest. Space communication leaders, both public and private, must work in tandem to improve regulatory oversight and ensure that public interest considerations govern space-based innovations.