According to Elon Musk, in three years, space will be the most affordable location for AI data centers

Elon Musk Says Space Will Be Cheapest Location for AI Data Centres Within 3 Years

Billionaire Elon Musk has predicted that within the next 36 months — or possibly sooner — space will become the most cost-effective location for artificial intelligence (AI) data centres, overtaking Earth due to superior solar energy efficiency and the elimination of battery requirements.

Speaking on the Dwarkesh Podcast, co-hosted by Dwarkesh Patel and Stripe cofounder John Collison, Musk argued that energy availability is the biggest constraint to scaling AI infrastructure on Earth.

“The availability of energy is the issue,” Musk said, adding that global electricity output outside China has remained largely flat while AI chip production continues to surge.

He joked that he should wear a shirt reading, “It’s always sunny in space,” explaining that space has no day-night cycles, seasons, clouds, or atmosphere — factors that reduce solar efficiency on Earth. According to Musk, Earth’s atmosphere alone causes nearly 30% energy loss.

“Any given solar panel can produce about five times more power in space than on the ground,” he said. “You also avoid the cost of batteries to carry you through the night. It’s actually much cheaper to do in space.”

Scaling challenge on Earth

Musk believes it may soon become physically impossible to scale terrestrial power production fast enough to meet the growing demands of AI systems.

He outlined three conditions that would make space-based AI infrastructure economically dominant:

• Earth’s power generation hits a hard ceiling

• Chip manufacturing outpaces energy growth

• SpaceX’s Starship achieves thousands of launches annually

If those factors align, Musk said, SpaceX could launch hundreds of gigawatts of power capacity into orbit each year, giving his AI company xAI virtually unlimited energy access while competitors struggle with land-based grids.

“The only place you can really scale is space,” he stressed.

SpaceX–xAI merger

The comments come days after SpaceX acquired Musk’s AI firm xAI in a deal valuing the combined entity at $1.25 trillion. The company aims to build a vertically integrated ecosystem spanning rockets, AI, satellite internet, and communications.

Reliability concerns

Addressing potential technical risks of running data centres in orbit, Musk said modern GPUs are already highly reliable.

“There’s infant mortality you can iron out on the ground,” he said. “Once they’re past the initial debug cycle, they’re quite reliable.”

Musk estimates that within five years, space-based AI computing capacity could surpass all Earth-based systems combined, fundamentally reshaping how large-scale AI is powered.