In a move that seems straight out of science fiction, the next major battlefield for artificial intelligence supremacy is being plotted not on Earth, but in the vast expanse of space. At the centre of this ambitious vision is Elon Musk's SpaceX, a company whose recent valuation milestones and strategic positioning suggest it could dominate this nascent field.
Record Valuation and a Path to Public Markets
SpaceX has had a remarkable period, with its private market valuation recently reaching a staggering $800 billion. This figure, based on reports of a secondary share sale, positions the rocket firm as more valuable than AI giant OpenAI or social media powerhouse ByteDance, the parent company of TikTok. While SpaceX did not comment on this valuation, CEO Elon Musk has all but confirmed plans for an initial public offering (IPO) in 2026, with rumours swirling about a potential $1.5 trillion valuation.
Interestingly, Musk has stated that SpaceX is already profitable and lacks a pressing need for cash. This raises the question: why pursue an IPO now? The answer appears to lie in a revolutionary new application that requires massive capital and speed to capture—artificial intelligence data centers operating in space.
The Space-Based AI Frontier
The concept involves placing powerful AI computing hardware in orbit around Earth. These orbital data centers would be powered by continuous solar energy and could offer a potentially lower-cost solution for running complex AI models, from advanced chatbots to autonomous vehicle training systems. According to Deutsche Bank analyst Edison Yu, this idea is gaining serious traction, with competitors like OpenAI, Jeff Bezos' Blue Origin, and Alphabet also exploring similar possibilities.
Yu highlights that Earth-based data centers are facing significant structural bottlenecks, including energy consumption, cooling requirements, and network latency. Space offers a natural solution: it is perpetually cold, providing ideal cooling conditions; satellites in the right orbit can receive near-constant sunlight; and communication via lasers in a vacuum can be faster than through terrestrial fibre-optic cables.
SpaceX's Twin Advantages
In this emerging cosmic race, analysts believe SpaceX holds two critical aces. The first is its dominance in launch services. The company currently accounts for more than half of all global orbital launches annually. Excluding China's state-led launches, its share jumps closer to 70%. More importantly, no other entity can deliver payloads to space faster or more cost-effectively, a vital edge for deploying and maintaining constellation-based infrastructure.
The second ace is Elon Musk himself. His leadership of Tesla, which integrates AI into physical machines, and his ownership of xAI (which owns platform X and competes with ChatGPT and Gemini), creates a unique ecosystem. This vertical integration from rocket manufacturing to AI application development provides SpaceX with an unparalleled strategic viewpoint.
Mark Boggett, an investment manager at Seraphim Space, a UK-based space investment firm, believes the idea is viable. He draws a parallel to the satellite broadband revolution, which was dismissed just a few years ago but now delivers services on par with terrestrial networks. The key innovation that made this possible was the advent of reusable rockets, which dramatically slashed the cost of access to space. Where the Space Shuttle cost tens of thousands of dollars per kilogram to orbit, SpaceX's Falcon Heavy does it for thousands, and the upcoming Starship system aims to reduce that to just hundreds of dollars.
Potential Beneficiaries and the Road Ahead
As hype around space-based AI infrastructure grows, Deutsche Bank's Yu identifies several public companies that could benefit. Rocket Lab, often called a mini-SpaceX, provides launch and satellite services. Planet Labs is collaborating with Alphabet on satellite development. Intuitive Machines, by acquiring satellite firm Lanteris, could gain a communications platform suitable for housing AI chip payloads.
Another notable player is EchoStar, which sold wireless spectrum to SpaceX in a deal that included $11.1 billion worth of SpaceX stock when the rocket company was valued around $400 billion. While it is too early to declare winners, these firms represent the vanguard of a new industrial space age, driven by the dual engines of connectivity and artificial intelligence.
The vision of AI humming away in orbital data centers is no longer pure fantasy. With SpaceX's launch monopoly, Musk's integrated AI strategy, and pressing limitations on Earth, the final frontier is poised to become the next crucial domain in the global technology race.
