A Bank of America analyst says the idea of putting data centers in space is moving from sci-fi to a serious investor narrative, driven by electricity constraints, regulation and launch-cost math that could shift over the coming months.
In a new CNBC interview, Bank of America Securities analyst Andrew Obin says he initially dismissed the concept, but changed his view after digging into the underlying drivers.
“Well, at first I thought it was bonkers. And then when you dig in, you actually realize that there are very specific developments that are driving the narrative. And we think it’s going to be front and center for investors over the next 12 to 24 months.”
Obin says America’s core problem is a power shortage, noting that electricity demand was already on a collision course with supply even before AI accelerated the need for compute. He adds that scarcity is already showing up in the practical reality of building data centers, where developers face long waits for grid access and rising regulatory scrutiny.
“Our point is that even without the AI, because of electrification, the US was not going to have enough capacity to meet the demand. So right now, if you want to build a data center, you have to get in line. You have to get your grid connection on top of the regulators now wanting you to do things to the data center because data centers are incredibly disruptive to the grid.”
Obin says space starts to look attractive in that context because it offers fewer regulatory constraints, abundant solar potential, and natural cooling advantages.
“It’s much less regulation, so you escape regulation. There’s plenty of sunshine. You can generate eight to 10 times the energy from the sun that you can on Earth. And it’s cold, so you don’t have to worry about cooling.”
Obin says the tipping point comes if launch costs fall far enough to make the trade-off between putting hardware in orbit and paying for electricity on Earth start to balance.
“And what’s happening at the magic number, if you can launch things into space at $200 per kilo, all of a sudden the math starts working that the cost of launch equals the value of all the electricity that you’re going to consume.”
He argues that the key variable is whether SpaceX can materially reduce costs through its next-generation Starship program.
“But the most important thing is that it’s what’s taking place at SpaceX. Right. And you have Starship Block 3 that’s going to become operational next year. And that actually is supposed to get you on this path of getting to $200 per kilo by the end of the decade. And in fact, Musk is also talking about Starlink V3 having this AI capability.”
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