Morgan Stanley suggests Elon Musk's next grand narrative could be space data centers, a concept driving SpaceX's soaring valuation. On December 9, reports emerged that SpaceX is exploring secondary market share sales at an $800 billion valuation. Analysts attribute this potential doubling in valuation to the expansion of SpaceX's business boundaries, with Musk outlining plans to venture into orbital data centers. Musk stated on X that space data centers represent "the fastest way to scale computing power in the next four years."
Morgan Stanley analysts detailed four core advantages of relocating data centers to space, including extreme cooling and unlimited energy. However, while SpaceX dominates the field, the bank notes that competitors like Google are also actively pursuing space-based data infrastructure.
**Musk Denies $800 Billion Valuation Report with Nuance** Earlier reports claimed SpaceX was initiating a secondary share sale at an $800 billion valuation, which would make it the world's most valuable private unicorn, surpassing OpenAI. Musk dismissed the report as inaccurate. Morgan Stanley noted that such a valuation would place SpaceX 13th in the S&P 500, between JPMorgan Chase and Oracle.
More strikingly, SpaceX's valuation would exceed the combined market cap of America's top six defense contractors (RTX, Boeing, Lockheed Martin, General Dynamics, Northrop Grumman, and L3Harris).
Analyst Adam Jonas highlighted subtlety in Musk's denial, suggesting he primarily refuted "raising new capital" while emphasizing SpaceX's positive cash flow and employee buybacks. Jonas also pointed to Musk's follow-up tweets justifying valuation growth—citing Starship, Starlink advancements, and expanded market potential from securing global cellular spectrum.
**Orbital Data Centers: Musk’s Next Grand Vision** Morgan Stanley outlined Musk's blueprint for space-based data centers, addressing Earth's physical constraints: - **Power Scarcity**: Depleting easily accessible energy resources on Earth. - **Scale**: Annual deployment of 1 million tons of payload to deliver 100GW of AI computing capacity via satellite constellations. - **Zero Operational Costs**: Facilities would eliminate traditional maintenance costs, linking to Starlink via high-bandwidth lasers.
Musk described this as a "convergence" of SpaceX and Tesla, leveraging upgraded Starlink V3 satellites with GPUs to form an orbital computing cloud. He projected Starship could achieve 100GW annual capacity within four to five years, pending technical hurdles.
**Key Advantages of Space Data Centers** Morgan Stanley detailed the benefits: 1. **Extreme Cooling**: Space’s 2.7 Kelvin (-270°C) environment reduces cooling energy use versus Earth’s 40% data center consumption. 2. **Unlimited Solar Energy**: Space offers 1361 W/m² solar constant—30% more efficient than Earth’s best conditions—unaffected by atmosphere or weather. 3. **Global Low-Latency Access**: Low Earth Orbit (LEO) resources minimize latency for distributed users. 4. **Scalability**: SpaceX’s 90% share of global payload capacity and reusable rockets like Starship could slash costs, enabling modular deployment.
**Industry Players Racing to Space** Beyond SpaceX, Morgan Stanley highlighted competitors: - **Starcloud**: A 2024 startup raising $20M+ to deploy orbital data centers for AI/cloud workloads. - **Axiom Space**: Developing free-flying orbital data nodes for commercial and government clients, with $700M+ funding. - **Google’s Project Suncatcher**: Solar-powered satellites with custom TPUs, targeting cost parity with Earth data centers by the 2030s. - **NVIDIA**: Partnering with Starcloud to test H100 GPUs in orbit, validating space-based AI hardware feasibility.
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