Not everyone is on board with Elon Musk’s concept of space-based data centers. 

Masayoshi Son, founder and CEO of Softbank, expressed at a recent shareholder gathering that constructing data centers in orbit won’t significantly lower expenses and will require too much time, since “in the race for AI, the upcoming years will be far more crucial than events that may emerge a decade from now.”

In the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I talked about Son’s comments within a wider conversation that covered OpenAI’s intentions for custom chips, Groq’s new $650 million investment round, and more.

Kirsten pointed out the “great irony” in Son being the skeptic, considering SoftBank’s “long history of daring investments.”

Sean added that when Musk discusses “creating a constellation of satellites — which need to be replaced every few years as well — to form an ‘orbital data center,’” he’s simply “assuring that much greater business” for SpaceX.

Continue reading for a sneak peek of our dialogue, refined for brevity and clarity.

Sean O’Kane: Listen, neo-clouds are the new oil, and everyone eager to profit is making the shift to a neo-cloud. I’m excited to announce that TechCrunch is now a neo-cloud; give us all your money.

I mean, this is the strategy. It appears there are numerous players constrained by compute limitations, so whoever can lease out that compute is capitalizing on it, whether that’s Groq, a company somewhat diminished by Nvidia, or Allbirds, which went into bankruptcy and emerged rebranded as a new neo-cloud vendor instead of just selling shoes — Tim Fernholz conducted an interview with the new CEO of that initiative that I highly recommend.

Or consider SpaceX, which proposed: I’m going to establish an AI platform that targets a market as broad as U.S. GDP, but first, we’ll just lease out our compute. We’ve seen this trend with SpaceX; although their deals with Google or Anthropic are more significant, they just inked another agreement, [their] inaugural post-IPO deal, to lease compute to a smaller entity. They are persistently moving in that direction.

I can foresee this becoming a near-term business for Groq. The real question with all these options is their long-term viability.

Anthony Ha: If we’re discussing SpaceX and their AI and data center ventures, we must also touch on Masayoshi Son’s recent statements, where he essentially questioned the purpose of space-based data centers, which is a query we’ve raised on this program. 

It reflects, again, the industry’s acute compute constraints — they need to establish as many data centers as possible, [and] numerous factors make this challenging on Earth, so perhaps space could be the solution. However, I believe Son raises some legitimate concerns: even if everything we’re discussing works — and the expenses are going to be extremely significant to implement it — this isn’t materializing for years and years, so it’s not a fix for any pressing issues regarding current data center requirements.

Kirsten Korosec: I’d like to emphasize that SoftBank has a longstanding tradition of making bold bets. It’s noteworthy when Son asks the question many have pondered. 

There are plenty of VCs and founders who have been captivated by the idea of orbital data centers, and it feels like suddenly everyone is on board. Just a couple of years prior, mentioning this would have been dismissed somewhat. Thus, I think it’s significant that a high-profile individual is raising this concern. Yet, it seems quite ironic that he is the one questioning it, considering his pitch deck features substantial investments in several ambitious concepts.

Sean: WeWork! Mark my words, we’re going to raise this point repeatedly over the next few years. The concept of placing these systems in space poses an intriguing engineering and economic challenge. 

Anthony, what you pointed out is certainly somewhat accurate. Elon Musk is someone who despises bureaucracy, and as there are no NIMBYs in space, he’s bound to pursue that path. 

To me, it ultimately boils down to: The business as it currently stands for SpaceX, particularly its launch segment, is overwhelmingly dependent on Starlink. The reason they command 80 or 90% of the global launch market isn’t solely due to their superior performance compared to nearly every other launch provider, but also because of Starlink, which significantly boosts that number. Without Starlink, they’d likely be around — I don’t know, maybe 20% or 30% of the launch market, or 40%, but certainly not 90%. 

When you discuss creating a constellation of satellites — which also need to be upgraded every few years — to constitute an “orbital data center,” you’re simply promising much more work for your launch business. I can’t help but emphasize that point.

Kirsten: I’d like to quickly mention that [SpaceX’s] other significant business is renting out their compute, by the way. So, circling back to the chip discussion, we’ve come full circle.

Anthony: One of the recurring themes in this episode could be the idea of advocating your own interests. This isn’t a novel occurrence. Executives at tech firms, or any other organizations, project their visions for the future, ultimately favoring their business interests. 

However, this is something important to keep in mind as we engage in discussions about major AI companies, especially during this moment of profound uncertainty. We’re all contemplating: What will the job market look like in the future? What impacts will this have on the environment? What skills will I need to acquire? 

All these AI CEOs or investors have perspectives on those issues. It’s not that they’re incorrect or intentionally misleading; however, there’s always an asterisk beside these forecasts. In Musk’s situation, he’s discussing something that would greatly benefit SpaceX. In SoftBank’s case, they hold extensive investments in terrestrial data center initiatives. Sam Altman is another notable figure who has raised his eyebrows at the notion of orbital data centers — and, again, he and Elon Musk undoubtedly share a long and complicated history.

All this points to the fact that there are no unbiased, objective observers in this discussion. Everyone involved has their own baggage and significant financial stakes.