Industry Experts Criticise SpaceX Proposal for Orbital Data Centers

SpaceX is facing significant industry backlash following its recent application to the US Federal Communications Commission (FCC) to deploy up to one million solar-powered satellites as orbital data centers. The ambitious plan, described by SpaceX as a step toward achieving a 'Kardashev II-level civilization'—a reference to a hypothetical society capable of harnessing the energy output of an entire planet—has drawn sharp criticism from technology executives, industry analysts, and environmental organizations.

Industry skepticism centers on both the economic feasibility and environmental implications of maintaining data centers in orbit. The FCC has invited public comments on the proposal, with the comment period ending on March 6.

In a report published this week, Gartner analyst Bill Ray labeled the concept as “peak insanity,” cautioning that current investments in orbital data centers represent a speculative bubble unlikely to achieve viability for decades. Nvidia CEO Jensen Huang also cited unsolved challenges, particularly around heat dissipation. In space, waste heat cannot be easily removed without airflow, necessitating large radiators—making orbital data centers more complex and expensive than terrestrial centers. OpenAI CEO Sam Altman dismissed SpaceX’s proposal as “ridiculous” during a press conference in New Delhi, saying satellite-based data centers are unlikely to become significant within the current decade.

Short seller Jim Chanos called the plan “AI Snake Oil,” pointing out that electricity costs account for only a small fraction (5–7%) of AI data center revenues, while all other costs would likely increase dramatically in orbit. Chanos questioned whether the core economics of such an endeavor make sense given current technology.

Environmental advocates are also raising concerns. DarkSky International, an environmental group focused on light pollution, has circulated a guide urging the public to object to the FCC. The group warns the SpaceX proposal could increase the number of active satellites around Earth by up to 70 times, posing threats to both the night sky and ground-based astronomy. Harvard astrophysicist Jonathan McDowell further noted the logistical challenges: a satellite deployment of this magnitude would present substantial obstacles to scientific observation from Earth.

Recent scientific research complicates the picture further. An MIT aerospace engineering study published in Nature Sustainability found that greenhouse gas-driven thermospheric contraction is likely to reduce atmospheric drag, potentially halving the satellite carrying capacity of low-Earth orbit by 2100. Meanwhile, an Associated Press investigation found that ground-based data centers are facing rising opposition in US communities over resource concerns—especially regarding energy and water usage.

Despite these criticisms and scientific uncertainties, SpaceX appears committed to pursuing satellite data centers. On February 2, the company completed its acquisition of xAI, bringing its combined valuation to $1.25 trillion. SpaceX founder Elon Musk has predicted that orbital data centers could become more economical than traditional terrestrial centers within two to three years—a timeline challenged by Deutsche Bank, which estimates viability is more likely to be reached in the 2030s. Other industry leaders, including Amazon founder Jeff Bezos, forecast the emergence of space-based data centers within 10 to 20 years. Google CEO Sundar Pichai has also indicated plans to send test hardware to orbit by 2027.

As of now, SpaceX operates about 9,500 of the roughly 14,500 active satellites in orbit. If approved, the new constellation would mark a radical expansion of infrastructure supporting cloud computing and AI, but numerous questions remain regarding economic viability, technical risk, and environmental impact.

For further details, refer to the original reporting at dataconomy.com.