Startup Says Space Data Centers Are The Answer To AI Power Crunch. Some Are Skeptical

A Seattle-area startup with more than $2M in funding and the backing of a prominent Silicon Valley accelerator plans to build massive artificial intelligence data centers in space. 

Lumen Orbit drew attention earlier this month with a white paper and marketing video that claim its strategy of launching facilities into space will alleviate the intense pressure on the power grid that the AI-driven data center boom has created. But actually building them will be a moon shot. 

The video in which Lumen Orbit unveiled its vision for space-based AI data centers this month is equal parts Hollywood and hard science. Accompanied by a Stanley Kubrick-inspired science-fiction soundtrack, a pencil-shaped data center pod glides out of a spacecraft’s cargo bay doors, its thrusters guiding it into docking position alongside other identical craft that poke out from a cylindrical core like an orbiting sprig of rosemary.

This, the viewer learns, is a 5-gigawatt AI training center, the camera panning to reveal a sea of solar panels stretching 4 kilometers end to end. 

Today, these orbital AI clusters remain the stuff of science fiction. But the founders of Lumen Orbit say that in as little as a decade, their space-based data centers will not only be operating in orbit, but they will also compete with traditional data centers on Earth to train AI.

It’s a compelling enough pitch that the firm raised $2.4M in investment in March and landed coveted backing by Y Combinator, the Silicon Valley accelerator responsible for companies like Twitch, DoorDash and Airbnb. 

The idea that Lumen Orbit will deliver space data centers anytime soon or that they will compete for AI tenants with traditional data center operators has met with skepticism from prominent voices in the space and data center industries. 

“You have to remember that for every big success that comes out [of accelerators like Y Combinator], you’re going to have nine companies that didn’t quite make it,” Scott Manley, a prominent commentator on space innovation, said on his YouTube channel this week. “I will be completely unsurprised if Lumen Orbit is one of those nine that fail.”

Still, Manley and other critics say space-based data centers are one of the technologies worth exploring as tech firms and infrastructure providers try to find ways to prepare for resource shortages that AI could bring, even if they aren't sold on the conviction of Lumen Orbit’s founders that the market for space-based AI will emerge sooner than later.  

“Space-based data centers are a complete inevitability below a certain launch-cost threshold,” Lumen Orbit co-founder and CEO Philip Johnston told Bisnow. “People enjoy being negative about things, but there's a promised land at the end of this tunnel that's worth fighting for.”

In a white paper published this month, Lumen Orbit’s leadership framed its planned space data centers as the answer to the mounting energy crisis that has accompanied the emergence of AI. The rapid build-out of new data centers to support energy-intensive AI computing is already straining U.S. power infrastructure, with AI-driven electricity demand expected to continue its rapid growth in the months and years ahead. This power pinch poses risks to the stability of regional power grids and the continued development of AI.

Lumen Orbit’s solution is to take power-hungry AI training workloads off the power grid and into solar-powered data centers in space. The firm’s concept design is effectively a space station in low Earth orbit, with computing equipment in modular pods that can be added or removed from the larger craft. This design can be scaled up to multiple gigawatts of capacity, according to the firm. 

At the heart of Lumen Orbit’s proposed design is the fact that solar energy can be generated far more effectively in space than on the Earth’s surface. While inconsistent energy production due to weather or time of day makes solar a bad fit for traditional data centers, orbiting solar panels are unhindered by weather, generate power more efficiently due to the lack of interference from the Earth’s atmosphere, and can be placed in an orbit where it is exposed to the sun at all times. This effectively allows space-based data centers to have an unlimited supply of free energy at all times and thus, at least theoretically, significantly reduced operating expenses.

Lumen Orbit may be the first company to actively pursue orbital data centers at such scale and for workloads typically hosted by traditional providers. But it is far from the first to pursue data centers in space. 

Hyperscale cloud providers like Amazon Web Services are launching edge computing units into space to test how computing equipment performs in the harsh conditions. At the same time, space-based digital infrastructure is a key part of an emerging space race between the U.S., Europe and China, with several agencies exploring data processing in space or on the lunar surface.

A handful of other startups have attracted investment for space data center concepts serving a variety of use cases, from disaster recovery workloads in lunar lava tubes to processing data from satellites or other space infrastructure. Often called orbital edge computing, this kind of simple, automated, space-based data processing is already in commercial use by some operators. 

The most common use cases involve filtering data collected from remote imaging satellites, but use cases centered around providing computing for space-based robotics or military applications are on the short-term horizon. Initially, Lumen Orbit’s business plan focused on this kind of space-based use case, and the firm's founders say they still plan on focusing on that market as a revenue bridge to help finance their larger AI vision. 

And while the startup’s pivot and partial rebrand to focus on hosting large-scale AI computing in space has pulled in investors, it has also attracted scrutiny — and some eye rolls — from prominent space industry veterans who say visions of gigawatt-scale data centers for AI might be plausible, but what Lumen is doing feels more like opportunistic marketing than a serious business strategy.  

“Anything with the words AI in it is made of gold right now, and for them to go straight to AI training feels like trying to hitch on to the bandwagon. If it was 2021, people would be pitching crypto mining,” said Rick Ward, CEO of space-based data center startup OrbitsEdge. “A lot of the stuff they’re talking about is valid, but I do have problems with what they’re pitching.”

The most significant concerns with Lumen Orbit’s plans, echoed by the startup’s own leadership, come down to costs. For data centers in space at any scale to make sense for any use case, the price has to be at least comparable to what it would be performing the same function on Earth. While the primary benefit of a data center in space is free power and subsequently lower operations costs, the initial cost of developing, building and launching the data center can’t be so high that the operations savings aren’t realized for years. 

“If your breakeven point is in 99 years, that's not really a business model. But if it’s in three to five years, then you have something that makes sense,” Ward said. “It’s really a matter of cost structures: What's your build cost, what's your launch cost, and then what's your ongoing maintenance cost?”

The most significant cost barrier that needs to be overcome to make orbital data centers a reality is the launch cost, the price for transporting materials into space. Johnston told Bisnow that an anticipated drop in launch costs triggered the firm’s shift toward large-scale AI data centers. 

Although the advent of private spaceflight through firms like SpaceX has created previously unimaginable opportunities for private firms to send payloads into space, the price of a ticket to ride is still far too high for data centers or other space-based industries to be viable. Lumen Orbit’s cost model outlined in the firm’s white paper is predicated on a launch cost of around $30 per kilogram. But for the company’s first two prototype launches in 2025 and 2027, Lumen Orbit will be paying SpaceX more than $6,500 per kilogram of payload. 

While there are widespread expectations throughout the space industry that launch costs will plummet in the coming years as SpaceX and other firms commercialize competing cargo launch vehicles, that timeline is uncertain. Until then, the cost of getting data centers in space remains prohibitive. 

Skeptics like Ward and Manley say Lumen Orbit’s white paper downplays some of the design and engineering challenges they must overcome to execute their vision — and the enormous expense required to do so. There will be significantly higher costs incurred to execute elements of the design ranging from data center cooling systems and connectivity to the mass production of parts and the path of the data center’s orbit, according to Manley. 

“I don’t think all these numbers are correct. I think there’s a number of problems that they haven’t really addressed,” he said. “They’re a company with money, and they’re going to spend time addressing these. I just don’t think the final numbers will be anywhere near as good as this.”

Even if Lumen Orbit ends up delivering large-scale orbital data centers that can compete on price with Earth-based alternatives, it isn't a sure bet that there would be widespread demand for hosting AI workloads in space. AI is still in its infancy, and there is no certainty as to how long the current growth trend will continue. Data center tenants are also traditionally risk-averse, slow to adopt even small innovations like liquid cooling systems.

But the existential power challenges facing the data center industry have made the largest tenants and operators more willing to explore unconventional approaches to securing new capacity, said Jeffrey Moerdler, a longtime data center attorney and member at Mintz who regularly advises on development and lease deals.

Moerdler said he is involved in a growing number of deals that use new innovative technologies like hydrogen power or small nuclear reactors to operate data center campuses off the grid. Lumen Orbit simply presents another solution to the same problem, he said. And while space data centers may not ultimately succeed, they aren't outside the realm of possibility.

“We’re in a brave new world,” Moerdler said. “We’re dealing with a series of sea changes impacting the landscape, which may make adoption of these kind of new technologies more likely and faster. There’s a much more welcoming atmosphere for considering alternative technologies.”