S&P webinar: New space economy drives orbital data center push

➤ The number of satellites in orbit has increased to about 17,000 today from 700 at the turn of the century.

➤ Space Exploration Technologies Corp. has filed plans for 1 million orbital data centers, while Blue Origin LLC has proposed 51,600, though experts cautioned these may not reflect actual deployment.

➤ The space technology market recorded $33.8 billion in investments in the first half of 2024, up from $2.2 billion in the year-ago period.

The emergence of a "new space economy" is driving ambitious plans for orbital data centers, though significant technical and sustainability challenges remain, experts said during an S&P Global Market Intelligence and S&P Global Energy Horizons webinar.

"We're seeing a major push in [Federal Communications Commission] filings for orbital data centers," said Johan Vermij, senior research analyst at 451 Research by S&P Global, during the Orbit as the Next Data Frontier: Capital Flows, Risk, and Realities webinar.

Satellite broadband drives market transformation

The space industry has dramatically transformed in the past two decades, with the number of satellites increasing to approximately 17,000 from 700 at the turn of the century, according to John Fletcher, senior analyst at S&P Global Market Intelligence Kagan. About two-thirds of them belong to Starlink.

"These LEO (Low Earth Orbit) satellites are only about 100 miles above the ground," Fletcher said. "They're flying at 18,000 miles an hour above our heads."

This proximity enables significantly better speeds and lower latency compared to legacy geostationary satellites positioned more than 10,000 miles above Earth.

The satellite broadband market in the US grew market share to 3% in the past year from 2%, driven primarily by Starlink's expansion. The service's average revenue per user has declined as it competes for market share, with prices as low as $30 per month in some cases. SpaceX's connectivity division is already profitable, with EBITDA margins in the 60% range for 2025, according to data presented at the webinar.

Fletcher said satellite broadband adoption is highest in geographically large, sparsely populated countries where terrestrial infrastructure deployment faces economic challenges.

"It's really good for rural areas, rural connectivity," he said. "The return on investment just isn't there for a lot of companies" to run fiber or cable to remote areas.

Access the webinar here.

Orbital data centers face practical hurdles

Concerns about terrestrial data center energy consumption and cooling requirements for AI workloads is partially driving the push toward orbital data centers. "The immediate reflex is like, okay, we got space in space, and it's cold, so we don't have cooling issues. We don't have CO2 emissions," Vermij said. "But it's a little bit more complicated than that."

SpaceX has filed plans with the Federal Communications Commission for 1 million orbital data centers, while Blue Origin has proposed 51,600, reflecting the scale of ambition in the sector. However, Vermij cautioned that these may not reflect actual deployment plans, noting a significant gap between FCC spectrum applications and real-world satellite launches.

Ellie Brown, research analyst at 451 Research, emphasized that sustainability considerations extend across the entire lifecycle of space operations, highlighting challenges including space debris, radiation damage and launch emissions. "We have a great opportunity here as we're scaling into space to move into this new frontier and to build it sustainably from the ground up," Brown said during the webinar.

Space radiation can damage computing equipment, requiring either expensive radiation-hardened chips costing up to $200,000 each or protective shielding technologies. The limited lifespan of satellites — approximately five years for low Earth orbit satellites compared to 15 to 20 years for some higher-orbit alternatives — necessitates regular servicing or replacement.

Launch emissions also present environmental concerns. "You're actually launching into the atmosphere. So where those emissions are released really changes," Brown said, adding that rocket propellants release ozone-depleting chemicals, including black carbon and nitrogen oxides.

Space debris poses another major constraint that could limit the growth of orbital infrastructure. The European Space Agency SA estimates there are about 54,000 objects larger than 10 centimeters in orbit, with millions of smaller pieces of space junk.

"These small pieces of space junk can create these catastrophic chain effects where all of these interactions and collisions can lead to full orbital bands that are so full of space junk that you can't launch satellites," Brown said, describing the Kessler effect scenario that must be avoided.

Market consolidation and strategic positioning

Investment in the space technology market surged to $33.8 billion in the first half of 2024 across 193 transactions, up significantly from $2.2 billion in the first half of 2023, reflecting growing confidence in the sector's commercial potential.

Major players are pursuing vertical integration strategies to compete in the evolving space economy. Amazon.com Inc. acquired Globalstar Inc. for over $11 billion in mid-April, primarily as a spectrum play to support its LEO constellation and enable direct-to-device services starting in 2028. Rocket Lab Corp. agreed to buy Iridium Communications Inc. for $8 billion in June, combining launch capabilities with mobile satellite networks.

"It's not just satellite companies buying competitors operating in the same space, but it's space companies buying capabilities in different orbital things," Vermij said, describing the consolidation trend.

The gap between ambitious FCC spectrum applications and actual deployment remains significant. While the number of applications adds up to more than 100,000 satellites by 2033, SpaceX has targeted 42,000 by 2030 but has fewer than 10,000 deployed.

Kepler Communications Inc. operates an orbital data center with just 44 graphics processing units (GPUs), illustrating the nascent state of space-based computing compared to terrestrial hyperscale campuses.

"Are we chasing stellar mirages or dreams?" Vermij asked, highlighting the uncertainty around whether proposed orbital data center constellations will materialize at scale.

The economics of orbital infrastructure also raises questions. While terrestrial communications towers cost approximately $500,000 to build and can last 30 years or more, each satellite costs about $1.4 million to build and launch, but has a five-year amortization schedule. "The economics of that is a little bit confusing to me," Fletcher said, though he noted that declining launch costs could improve the business case.

Despite these challenges, experts identified several promising use cases for space-based computing, particularly "space edge compute" for processing data from Earth observation satellites before transmission to ground stations. This could avoid bandwidth constraints from downloading massive amounts of raw imagery.

The webinar panelists emphasized that international standards, space traffic management and active debris removal will be critical for the sustainable expansion of orbital infrastructure. "We need to focus on international standards, space traffic management, actively removing the debris," Brown said, noting that proactive measures are essential as the industry scales into this new frontier.

– Access the Market Intelligence webinar replay portal. – Access more Energy webinars here. – Dive into Technology, Media and Telecommunications content with S&P Capital IQ Pro. – Access more TMT webinars. – Dive into the S&P Global Energy Horizons page.

Disclaimer: This content may be AI-assisted and is composed, reviewed, edited and approved by a human at S&P Global. S&P Global uses generative AI to create content in accordance with our Terms of Use.