Google is in active negotiations with SpaceX to launch data centers into orbit, the Wall Street Journal reported Tuesday, marking the first concrete step toward what could become the most ambitious AI infrastructure project ever attempted.

The initiative, called Project Suncatcher, is Google's plan to network solar-powered satellites equipped with its Tensor Processing Units into an orbital AI cloud. The company plans to launch prototype satellites with partner Planet Labs around 2027, with a target of mid-2030s for commercial operation. Google is also in discussions with other rocket-launch companies, according to people familiar with the matter.

Why Space?

The logic, at least on paper, is compelling. Space data centers run on unlimited solar power, produce no local noise or water consumption, and are immune to the backlash that has turned AI infrastructure into a political flashpoint across rural America. With data center power demand in the US projected to double to 106 gigawatts by 2035, the industry is running into physical constraints: not enough power, not enough water, not enough land that local communities are willing to surrender.

But the economics today are brutal. TechCrunch reported in February that terrestrial data centers remain far cheaper than orbital alternatives once satellite construction and launch costs are factored in. The technology is capital-intensive, technologically unproven at scale, and dependent on rocket cadence that does not yet exist.

The SpaceX IPO Play

The timing is not accidental. SpaceX is preparing for what could be the largest initial public offering in history, targeting a valuation of roughly $1.75 trillion. Orbital data centers are a central part of the pitch to investors: a new TAM that does not yet exist, backed by contracts with the biggest AI spenders on the planet.

Last week, Anthropic agreed to use the full computing power of SpaceX's Colossus 1 facility in Memphis and expressed interest in working together on multiple gigawatts of space-based orbital data centers. Now Google is at the table. That means two of the three largest AI companies are in discussions with SpaceX about orbital compute, lending credibility to a concept that a year ago would have been dismissed as science fiction.

Google invested $900 million in SpaceX back in 2015, according to SEC filings, and currently owns 6.1% of the company. A partnership on orbital data centers would deepen a relationship that predates the AI boom by nearly a decade.

The Competition Is Already Moving

Google is not the only one thinking orbital. Cowboy Space raised $275 million on Sunday to build rockets specifically designed for space data center payloads, per TechCrunch. The startup argues there are not enough rockets to service the coming demand, even from SpaceX. Blue Origin's New Glenn rocket failed to deliver a satellite during its third launch in April, underscoring the infrastructure gap.

For now, orbital AI remains a bet on the future, not a present-tense capability. But when Google and SpaceX are both at the table, the future tends to arrive faster than the skeptics expect.

Sources: TechCrunch, Reuters, Bloomberg