Short seller James Chanos has raised significant doubts about the viability of Elon Musk‘s proposal for orbital datacenters, labeling the notion as “AI Snake Oil.” Chanos voiced his concerns on the social media platform X, questioning the economic feasibility of placing datacenters in orbit, particularly following the merger of xAI into SpaceX.
Chanos highlighted that the operational costs associated with space-based datacenters would likely exceed those of traditional ground facilities. He noted that the annual electricity cost for AI datacenters is around $600,000 per megawatt (MW), which comprises approximately “5-7% of revenues on recently announced deals.” His analysis suggests that the additional expenses related to launching, radiation shielding, insurance, and redundancy would further inflate costs.
Concerns Over Cost and Hype
Expanding on his critique, Chanos emphasized that while there are challenges with grid power permitting, the situation is improving. He stated, “Actual power is in abundance in the US, particularly when energy companies partner with private power producers.” This assertion contradicts the narrative that space-based facilities could provide a more efficient energy solution.
Chanos cautioned stakeholders in the tech sector against succumbing to the hype surrounding orbital datacenters. He urged them to present “actual cost figures/savings” when discussing the potential benefits of AI computing in space, calling for a more transparent evaluation of Musk’s ambitious plans.
Regulatory Developments and Future Considerations
In a related development, the Federal Communications Commission (FCC) has invited SpaceX to provide input on its proposed orbital datacenter initiative. This plan involves deploying over 1 million Non-Geostationary Satellites (NSGO) positioned between 500 and 2,000 kilometers above Earth. SpaceX has previously sought multiple waivers from regulatory requirements to advance its project.
As the conversation surrounding orbital datacenters evolves, it remains crucial for industry leaders to substantiate claims with concrete data. Chanos’ skepticism serves as a reminder of the complexities involved in such groundbreaking technological pursuits.
