The AI Build-Out Is Heading for Orbit

Editor's note: The next big AI breakthrough may not be a better model. According to Joel Litman, chief investment officer of our corporate affiliate Altimetry, as data centers consume more electricity and generate more heat, researchers are hunting for more efficient solutions. And now, they're looking to space for an answer – potentially creating a new wave of opportunities...

The AI boom is straining Earth's physical limits...

As AI models grow more powerful, they'll require extra computing power. That means more data centers, which means more electricity, more cooling equipment (including fresh water), and more land.

The concern now is whether the Earth can supply enough of these finite resources to support AI's growth.

In July, researchers at the California Institute of Technology ("Caltech") and space-technology startup Sophia Space announced a patented cooling system that could move some of the infrastructure needed off the planet.

Their design uses solar power and specialized tiles to move heat away from computing equipment and radiate it into deep space. They say the technology could support orbital data centers by the early 2030s.

But cooling has been a major barrier. Space has no atmosphere or readily available water to carry heat away from densely packed chips.

Today, we'll explain why solving the orbital cooling challenge could open a new path for the AI infrastructure boom... especially as power, water, and land constraints tighten on Earth.

AI Has a Massive Heat Problem

Data centers are growing faster than the power grid can keep up. We can already see that strain in electricity consumption levels.

U.S. data centers consumed about 58 terawatt-hours ("TWh") of electricity in 2014. By 2023, that figure had more than tripled to 176 TWh – equal to roughly 4.4% of all U.S. electricity use. And that growth is expected to accelerate...

The latest Lawrence Berkeley National Laboratory reference case projects that U.S. data-center electricity use will reach 649 TWh in 2030. That's roughly 11.8% of total U.S. consumption. Take a look...

 

This demand problem isn't limited to the U.S., either. The International Energy Agency ("IEA") expects worldwide data-center electricity demand to nearly double from 485 TWh in 2025 to 950 TWh by 2030. Electricity use from AI-focused facilities is projected to triple over that period.

On top of all that, AI chips are packing far more power into smaller spaces as they evolve. The IEA says that server power density increased 11-fold between 2020 and 2025... and is set to rise another fourfold by 2027. That increase in electricity will also increase the amount of heat that's concentrated inside each rack.

Nearly every watt consumed by computing equipment eventually becomes heat. So the big battle in space will be figuring out how to get rid of all that heat.

Terrestrial data centers can move it into air or water. An orbital data center has neither. So in space, heat has to leave primarily through radiation.

That makes the cooling hardware massive.

A relatively small, 1-megawatt orbital data center using conventional technology would need roughly 1,600 square meters of radiator area.

Reducing the amount of radiator space needed could make orbital data centers much more practical. That's the problem Caltech and Sophia Space are trying to solve.

Their idea is to build data centers in space with special tiles that pull heat away from the electronics and release it into deep space. The system would be powered by solar energy collected in orbit.

Instead of generating electricity in space and sending it to the ground, the system would use that electricity to run computers in orbit. The computers would then send processed data back to Earth... Sophia Space says that's far easier and cheaper than transmitting the electricity itself.

A New Way to Invest in AI's Next Infrastructure Boom

Space offers an escape from Earth's physical limits...

Data-center demand is soaring while power grids and cooling systems struggle to keep pace.

That pressure is already showing up in electricity forecasts... And it will only intensify as AI facilities grow in number and scale, consume more power, and concentrate more heat into each server rack.

That's what makes the Caltech and Sophia Space cooling system so important.

If the technology can work on a large scale and at a reasonable cost, it could make building data centers in space a viable option. And it would allow us to harness solar energy rather than relying on electricity generated by finite resources.

For investors, that expands the AI opportunity well beyond chips and servers. The next phase of the build-out will reward technologies that solve the physical bottlenecks holding AI computing capacity back.

Orbital data centers could give AI another path to expand if Earth's infrastructure can no longer keep up.

Keep an eye on this technology over the next few years. It could offer a new way to invest in the AI boom.

Regards,

Joel Litman

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