The problem with doing this buildout on Earth is that, like, the marginal cost on every additional data center goes up every time you add one because we're using all the easy places to build energy projects.
In space, the marginal cost goes down for every additional unit because you're now manufacturing at rate and you're, you know, the more Starships you fly, the cheaper it gets and all the rest of it. And so there comes a crossover point where it just makes zero sense to continue building things on Earth. So I think it will be like close to a trillion dollars per year of capex spend within 10 years being deployed in space. So by far the largest market opportunity ever.
We are thrilled to have with us today Philip Johnston, founder and CEO of StarCloud. You were the first to put up data centers in space. And just a few months ago, your first data center, StarCloud 1, sent back the message to Earth, 'Greetings, Earthlings.' Or, as I prefer to think of you, a fascinating collection of blue and green. What a poetic thing to think about. AI in space looking back at us. Congratulations on what you've done. I'm excited to ask you all about data centers in space for this episode. Maybe for us to get started, why build data centers in space?
Yeah. So firstly, thanks so much for having me. It's freaking awesome to be here. So a quick background on myself. I've been interested in space my whole life. I actually spent a few years with McKinsey, with the space agencies of the different governments around the world, and that's where I started to notice that the launch cost was very rapidly coming down.
And so three years ago, I kind of randomly on a weekend decided to take a trip down to Starbase, Texas, where SpaceX is building the Starship launch vehicle. And I think it just blew me away, the scale of the new sort of gigafactories they're building. I think they're planning to build three Starships per day or something on that order. And so the coming capacity and the potential launch cost is, you know, orders of magnitude off where it is today. And so, you know, I started thinking about, okay, what is that going to enable? What new businesses will that enable? And with my co-founder Ezra, and Ezra and I go way back, we grew up in the same place in the UK. We started looking at the concept of space-based solar, which is where you have these huge solar panels in space and then you somehow beam that power down. It's not really a new idea. I mean, people have been looking at this since, I think, Isaac Asimov in the '40s was talking about it.
The problem with space-based solar is you lose most of the energy in transmission from space to Earth. And we very quickly realized, okay, once we get that power down, you know, most new energy projects on Earth today are being built to power data centers. So either directly or indirectly, that power is going to be going into data centers. And so if we can find instead a cheap way to get the data center to space, we don't lose all of that power in transmission. We can consume that power close to the source, and that then became the basis of a white paper that we put out in 2024. And from there, that's how the company got going.
Well, let me ask you, so there's a distinction I heard a lot in there on it is possible to do data centers in space. Why do we need to do data centers in space? Maybe possible. Yeah. Why do we need to do it? Why do we need to go to space?
Yeah, it's a great question. The main reason is we are very quickly running up against constraints on where and how we can build new energy projects terrestrially to power data centers. So for example, if you want to build a new 100 megawatt energy project, you're looking at a 5 to 10 year lead time just on the permitting, particularly in North America. And so for example, if you want to cover 10 square kilometers of countryside with solar panels, there's a lot of people who are going to be very annoyed about that. And so you just have these, you know, we're very rapidly plowing towards a brick wall where it's going to be extremely difficult to build new energy projects. We've already built in the easy places.
If we could wave a magic wand and remove the regulatory constraint, what's the next constraint we run into?
Well, it is actually just cheaper to build things in space once the launch cost gets below a certain point. So, for example, with terrestrial solar, which is the cheapest form of energy we have, you've got three big costs. The first one I mentioned, which is the cost of permitted land. The second is the cost of battery storage and backup power. And then the last is the cost of the solar cells themselves. So in space, number one, we don't need permitted land. Number two, we don't need batteries and backup power because we're 24/7 in the sun. And then lastly, we need eight times less solar because one square meter of solar panel in space produces eight times the energy of one square meter of solar panel on Earth. And so there's a break-even point where the launch cost, which is our main additional cost in space, where the launch cost comes below the cost of those three factors, we see that break-even to be around $500 a kilo. But as the cost of permitted land goes up, which it is going through the roof right now, that break-even point actually comes even closer to $1,000 a kilo. But as I say, even if your permitted land cost is zero, you still have those other two factors. And so at some point, if you're going to build data centers anywhere, you know, once the launch cost is below a few hundred bucks a kilo, you're going to do it in space because it's just cheaper.
What have you learned about maintenance in space?
Yeah, it's a great question as well. So for maintenance, we'll be operating very similar to the way that Starlink satellites work in the initial years. We're not going to have robotic maintenance or anything for the first few generations at least. And so that means we need to have redundancy on the critical systems, and then we overprovision things which fail over time, like solar panels. You lose a few percent per year. It's very, very important that the chips do not have a higher failure rate in space than they do on Earth, because the chips are one of the largest costs in this. And so a huge amount of our time, probably 70% of our engineering time, is going on to the heat problem, and the other 30% is going on to making the chips as reliable as possible in space. And that means a whole bunch of testing in different particle accelerators. We did two rounds of testing at the cyclotron proton beam accelerator in Knoxville, one round of testing at the heavy ion particle accelerator in Brookhaven National Lab. And we run it in 24 hours, we can simulate five years' worth of radiation. And with that, then all of that data then goes into informing our choice on shielding and other, you know, software for bit flip mitigations and things like that. But in terms of what we've learned on the first satellite, it's actually the H100 that we have on orbit right now. We've not had a single restart failure yet or issue that needed a restart from the chip itself. There are other areas which we may need to put a bit more attention to. For example, the power delivery and solid state drives, but the actual chip itself is extremely resilient, and GPU workloads in general are very resilient. And the reason is they're stochastic in nature. And so if you, for example, if you type into ChatGPT, 'Write me a poem about space,' it will give you two different poems. The quality of the poem will be the same, you know, it will have the exact same quality of the output, but the specific instance will be different. And so with a bit flip on any part of that, or on most of the parts of that workload, it actually doesn't make a difference to the quality of the output. So it's actually, yeah, it's surprisingly resilient.
You said you spend the bulk of your engineering time on the heat problem. I think most people have this notion that, you know, space is cold and so therefore it should be an easier problem. When Sonia says most people, I thought that was the case. Until a few months ago. So can you just talk about, you know, what exactly is the heat dissipation problem and what are you doing to solve it?
Yeah, for sure. So yeah, as you mentioned, space is cold, and in general that's actually, once you get far enough down this rabbit hole, that ends up being great. What's not great is that space is a vacuum. And so obviously, like a thermos flask is designed that way because a vacuum is an insulator. And so the only form of heat dissipation you can have is infrared radiation. And so everything in this world glows in infrared. If you had a camera on your face, your face would be glowing in infrared. And the same is true in space. And the amount that it glows is proportional to the temperature differential between the temperature away from your face or away from the satellite, versus, and it actually scales with the fourth power of the temperature. So a very small increase in the temperature increases the heat dissipation by a huge amount.
And so one of the critical things is we need to run these radiators as hot as possible. There's a few different ways you can do that. Either you can try and run the chips as hot as possible. The problem with that is the chips have a shorter lifetime if you run them hot. The other thing you can do is there's a few ways to artificially boost the temperature of the radiator. So things like heat pipes, heat pumps, sorry, which you can take, for example, 60-degree fluid from the chips and then you can turn that into 100-degree radiator temperature with heat pumps.
Got it. And so would you say the heat dissipation problem is like a solved problem for you all now? You obviously have one GPU in space. What is it going to take to solve the problem for, you know, eventually hopefully gigawatt-scale data centers in space? How does it change as you scale?
Yeah. So the first one actually has a very different thermal management system than the next one coming up. The first one, we submerged the entire motherboard, power systems, GPU, and everything else in this phase change material. It's like a material that goes from solid to liquid as it heats up. We can't run that continuously though. That was merely just to prove out that this works. The second one is much closer to the end state, which has got this enormous, low-cost and low-mass deployable radiator. So it has liquid, we've got custom heat sinks next to the GPUs, runs past this fluid, runs past the GPUs, and then out to this extremely large deployable radiator. From that one to the next one, just scaling it up, it actually is pretty simple. And so yeah, we've tested this, you know, in thermal and vacuum chambers and it works. We just need to now put it on orbit and make sure it actually works on orbit. And that's going to happen later this year.
Awesome. And how much, I guess relatedly, you have one GPU up in space currently. Do you see yourselves launching? Oh, you have five now. I see. I see. How much, I guess, what is the launch capacity, so to speak? What can you get up in a single payload and how big do you think these individual data centers can get?
Well, no, there's five Nvidia GPUs on that first one. The H100 is the one that gets the press.
Yeah, so we're designing for the StarCloud 3. The next one that we're launching is around 8 kilowatts. So pretty small still. The one after that, which is what we're now designing, is the StarCloud 3. We can fit 50 of them per Starship, and they fit out the PEZ dispenser form factor, that door that Starship has, that little slit. So each one of those is about 200 kW, about three tons. And so if you're 200 kW per StarCloud 3 satellite, and it's all for inference essentially, that means you can fit 50, so it's about 10 megawatts per Starship launch. And so once Starship is flying at rate, you know, we're expecting to fly hundreds of these per month. And so you're talking, you know, several gigawatts of new capacity per month, tens of gigawatts of new capacity per year.
So you mentioned it's all for inference. I was wondering about that because pre-training, you want contiguous compute, might be tough if you're sending everything up into space. Inference, you want low latency. There's some, you know, there's a speed of light component getting information to and from space. Is that a bottleneck at all, or is it low latency enough that it doesn't matter for inference?
It's as low latency as Starlink. So if you can do any inference workload through Starlink, you know, if you were using ChatGPT on your phone through Starlink, for example, it would be exactly the same. So sub-50 millisecond latency when you're on Earth, and that means any, you know, like if you have a Zoom call, that could easily happen with 200 millisecond latency and you wouldn't notice the delay there. So basically any inference workload, you know, voice agents for customer service or back office business processing agents or video generation or ChatGPT or anything else can be done with this constellation.
And then maybe a slightly different question, but kind of on this vein. If you had a trillion dollars just sitting in a bank account and you had to use it to build the compute backbone for AGI, how much of that trillion dollars is going into space? 100%. Okay. All right. Paint that picture for us.
I mean, we really are talking about by far the largest market opportunity ever. So we are talking about trillions of dollars per year of capex spend going. My best guess is that within 5 to 10 years, at least half of all new compute capacity is being deployed in space for the energy. So the problem with doing this buildout on Earth is that every additional data center you add to the grid, like the marginal cost on every additional data center goes up every time you add one because we're using all the easy places to build energy projects.
In space, the marginal cost goes down for every additional unit because you're now manufacturing at rate and you're, you know, the more Starships you fly, the cheaper it gets and all the rest of it. And so there comes a crossover point where it just makes zero sense to continue building things on Earth. So I think it will be like close to a trillion dollars per year of capex spend within 10 years being deployed in space. So by far the largest market opportunity ever.
Where and when do you think we will first cross over? When I say where and when, I mean like what geos will become untenable and therefore you'll need to go up into space?
As soon as Starship is flying frequently, it will be cheaper to build data centers in space. So my guess for it looks like the first Starlink payloads will be either end of this year, early next year, Starlink V3. And then, as I understand it, it will be 12 to 18 months after that that the first commercial payloads are going up. And so that will be, yeah, on the order of mid to late 2028.
And then once it's flying frequently, it becomes way cheaper. Do you think that there's, you know, stuff that needs to be solved in terms of data transmission? Like, do we need optical lasers sending data back and forth up there in order to kind of, once we're operating data centers at scale in space? And are those all solved problems? Mesh network in space.
That's solved. Yeah, it didn't used to be until two or three years ago, but, you know, Starlink has basically solved that. And there's a bunch of other constellations coming online. Amazon, Leo, Kepler. And also once we have a few of our own satellites, we can do our own optical backhaul. So that, yeah, that problem would have been a big problem until quite recently, but now.
And so each PEZ dispenser will be its own data center. Do you see them ever, you know, coming together? You had that picture, that concept photo in your first white paper. Do you see them being able to dock onto each other eventually?
Yeah. It doesn't really make too much sense to do that initially because the only reason you would do that is if you want to train a large model in space. And to train a frontier model, you need whatever the largest data center on Earth is, you need at least that in space. So right now that might be like 300 megawatts or something. You know, it's going to be a long time before we're going to be able to dock together a 300-megawatt structure in space. And by that time, the biggest one on Earth will probably be 3 gigawatts. So it's like a moving goalpost. And the other thing to say about that is training at the end state will be less than 1% of all AI workloads that are being done, and so it's just not a very good market to go after anyway. Yeah, we showed it in the initial video because we didn't want people to come back and say, 'Oh, you can't do training in space.' And we're like, 'Well, you could if you wanted to, but it's probably not ideal for the initial.'
Got it. It's more of a provocative photo. What about, you mentioned at the very beginning, robots? Like, do you think we'll end up having maintenance robots in space to maintain these data centers?
I don't think we'll necessarily be maintaining our smaller inference nodes, but certainly we will have fleets of robots building large structures in space. I mean, they'll definitely be on the moon. Like if you're going to build big manufacturing facilities on the moon, essentially something like Optimus will be doing that. Like an Optimus robot doesn't require too much modification to work in space. You just essentially put it in a spacesuit and that takes care of the thermal and radiation aspects of it. So.
You don't see Optimus going to go maintain your...
Not really, because they're too small. Each one's only 200 kW. So we just need to make sure that they're... if we docked it together, then yeah, you could have Optimus maintaining it, but you wouldn't fly Optimus between each of ours. And well, maybe you would. I don't know. That starts to sound a bit sci-fi.
What's the useful life on them and how do you retire them?
It's about... so we're designing it to be the same as the useful life of the chips. So five, six years. Potentially, possibly longer actually in space because our marginal cost of energy once we're launched is zero. So there's an argument to be made that we can run them longer. But end of life for now is the same as Starlink. So de-orbit. There is, you know, another possibility which is putting them in some kind of graveyard orbit, they call it. But for now it's just de-orbit.
What goes into making a great... like you guys have a bunch of mechanical engineers, satellite engineers, like what goes actually into the engineering of solving this and what are the core competencies you look for?
Yeah, so as mentioned, the two biggest challenges are the thermal and the high radiation environment in space. So for the thermals, we've got, for example, the guy from NASA's Jet Propulsion Laboratory who designed the radiator or all of the thermal system for the Europa Clipper mission, that was NASA's largest, most expensive deep space mission ever. He also designed the thermals on the Firefly lunar lander and for three of the NASA payloads. And then another guy from Amazon Kuiper or Leo constellation now, who's lead thermal engineer there. And then a bunch of people from SpaceX for the thermal side of things. And then for the radiation testing side of things, my co-founder Ali has previously launched a bunch of GPUs and did all this kind of particle accelerator testing and stuff.
Has anything surprised you from the testing?
A few things, but this is like our core IP. We're a bit tight-lipped about some of the things.
It's okay. It's a friendly audience. Okay. So you very much seem like a SpaceX Elon Maxi based on some of the things you've said. What do you think of some of the alternative space launch companies?
I'm very, you know, hopeful and positive about them in general, but I mean, Elon, I mean, you guys have a massive SpaceX position, so you guys are presumably SpaceX Maxis too. But, and what a great investment from Sean, by the way. Like, I think it was Sean. SpaceX, like I think Sean said it's the best company ever. I do think SpaceX is the best company ever. I think they're like unbelievable what they're pulling off. So they're now, they're just so far ahead of everybody else. Like the other companies that could do... you need a reasonable upper stage to be anywhere close to cost competitive. So you have Stoke, Relativity is potentially going to look at it. I think that New Glenn is going to... the Blue Origin rocket, they haven't announced it, but they've started hiring for heat shield engineers, and you would only do that if you have a reusable upper stage. And then Rocket Lab, I don't think are even trying. So even if they were to start now, you've got a five to ten year long development cycle on a reusable upper stage.
And to that end, you guys partner with them. They are your launch partner. How does it feel to be building something where you know now Elon has also stated that his intention is to put a lot of data center capacity up in space?
Yeah. I mean, so SpaceX are amazing partners. Like our company definitely wouldn't exist without the Radiant program. And in general, they're like extremely, you know, they work hard to foster the whole ecosystem. I mean, they launch their own competitors. They launch Amazon Leo, the Kuiper constellation, and they launch OneWeb, which is both direct competitors to Starlink, and they open source their patents and things like that. So yeah, we love working with SpaceX. In terms of like the way that I think this plays out, because you're right, now they're going extremely aggressively into building their own data centers. So SpaceX will have a lower cost base than us because they own the launch. I think the way that we fit into this is kind of twofold. Number one, SpaceX are mainly going to be serving their own workloads. So Grok and Tesla and others, they may offer a third-party cloud service, but as I understand, there's no intention to offer a box that people can put their own chips on, which is the core offering that we have, which is we essentially give people a box and it has power, cooling, and connectivity, and then they can put whatever chip architecture they want in there and sell to whichever customers they want. So you can think of us more like Equinix, while SpaceX might be more like AWS or something like that.
But so they will have a lower cost base than us, but we will have a lower cost base than all of the hyperscalers. So the way I see this playing out, if it's true that on a sort of five to ten year time frame most new data center capacity is being deployed in space, what's going to happen is in three years once Starship is flying frequently, all of the hyperscalers are going to realize this and they're going to be like, 'Oh, like if we don't have access to space compute, we are screwed because we can't scale anywhere near as fast as those that do.' And so at that point, they have three options, I think. So one is, you know, they can pay Elon for his space data center capacity. And for sure, some of them will do that. That'll be a good option. Some of them won't. You know, I think lots of... it seems unlikely that OpenAI or Meta or Google or Microsoft would do that. Or they can start building their own satellites. Again, some of them might do...
That seems unlikely. I mean, Google, for example, say they're doing what we're doing. What they're actually doing is they're paying Planet Labs to do a demo in 2027. Which, I mean, yeah, it seems like they're not moving particularly aggressively if they are doing that. Or they'll look around and they'll say, okay, who has the most—we need to move quickly on this, like who has the most advanced capability in the market. And at that point we will be by far the most advanced in terms of what's deployed on orbit and the engineering team and all the IP that we have. So I think at that point we become an interesting partner with those guys. And I do mean partner, not necessarily just acquisition target. You know, I think there is a customer relationship where we provide the infrastructure and energy and they do the cloud providing part of it.
Well, yeah. And I have the business model question then. Why choose the Equinix business model versus AWS or even Azure?
It's a good question. Yeah, we've been certainly looking at the cloud, like being a cloud provider ourselves. In the initial early days, we will probably have to do something like that because nobody's going to trust us with their chips until we've proved that it works a few times. We would much rather be an infrastructure and energy play than a cloud provider. And the reason is our core—the core IP of the company and the core skill that we're good at is building satellites that can dissipate heat and protect you from radiation. We don't necessarily want to rebuild, you know, AWS has spent 20 years building an incredible application layer on top of AWS and customers don't necessarily want, you know, to not be able to use that functionality. And so the other point of it is the most expensive part of all of this is the chips and we would rather have somebody else finance the chips and, you know, they can decide whatever chip architecture they want and all the rest of it. Yeah, maybe much further down the line it will make sense for us to have a cloud offering, but initially I think there's a great business and it's also much higher margin. Depending on which way you look at it, it can be much higher margin. Yeah.
Okay. I have a question about real estate. How does real estate work in space? Because earlier you were saying one of the issues on Earth is you're running out of physical real estate to go build data centers on. How does real estate work in space? And as space gets more crowded, how do you think it will work?
Yeah, I mean, for now it's essentially first come, first serve. And so we've just filed for a constellation of 88,000. It would allow us to deploy about—
In the US you file with the FCC. If you're going to interact with US ground stations, you have to. If not, which actually in our case we won't, you can pick any regulator in the world. And then they are under the ITU, the sort of global governing body. It's weird that the FCC manages this, but like I also think that's weird. I think it's a legacy from the days when the only thing satellites did was communication and RF spectrum and things like that. Now they're doing much more. It's a bit of a legacy hangover that the FCC is.
So real estate today is first come, first serve. How about 10 years from now?
10 years from now, I expect it will be that certainly the most valuable slots will get filled up and then it will probably be that whoever got them first will have the right to sell them.
