SpaceX AI satellites plan raises doubts after Microsoft setback

SpaceX continues its development of orbital data centres which will support its artificial intelligence expansion efforts, yet experts believe that these facilities will encounter the same obstacles that caused Microsoft to discontinue its underwater research project.

The proposal, revealed alongside a potential IPO, involves launching up to one million satellites to power AI systems in space, aiming to overcome Earth’s energy and water constraints.

Microsoft’s experiment offers early warning

Microsoft tested a similar concept through its Project Natick, which placed data centres on the seabed to reduce cooling costs and use renewable energy. The project achieved its technical objectives but needed to be stopped because there was insufficient market interest and the project's financial performance was unsatisfactory.

The Microsoft spokesperson explained that the project functions as a research platform which does not provide any commercial applications because it demonstrates that potential business operations are not yet profitable.

Experts believe that SpaceX's orbital data centres will face more significant challenges than their current problems. AvidThink Principal Analyst Roy Chua explained that three major challenges, which included vacuum cooling systems and radiation exposure and expensive launch costs, would create operational difficulties.

Unlike land-based data centres, underwater and space-based data centres are based on sealed, modular systems, which cannot be repaired or upgraded. This is at odds with the rate of development of AI chip technology, which can become obsolete within a few years. 

Analysts at MoffettNathanson estimate that it will cost trillions of dollars to deploy a million AI satellites. The cost of launching satellites has to come down significantly for this model to work. TMF Associates' president, Tim Farrar, said that the question is, can it compete with ground-based systems at lower cost?

While companies like Blue Origin are also exploring orbital computing, most experts believe the concept will remain niche. Analysys Mason, Research Director, Claude Rousseau said space data centres are more likely to support in-orbit infrastructure rather than replace Earth-based systems.

Even Nvidia Chief Executive Jensen Huang has questioned the economics, saying computing on Earth remains more practical for now.Analysing,