After taking one small but historic step for space-based AI, a Seattle-area startup called Starcloud is gearing up for a giant leap into what could be a multibillion-dollar business.

The business model doesn’t require Starcloud to manage how the data for artificial intelligence applications is processed. Instead, Starcloud provides a data-center “box” — a solar-powered satellite equipped with the hardware for cooling and communication — while its partners provide and operate the data processing chips inside the box.

Starcloud CEO Philip Johnston said his company has already worked out a contract along those lines with Denver-based Crusoe Cloud, a strategic partner.

“In the long term, you can think of this more like an energy provider,” he told GeekWire. “We tell Crusoe, ‘We have this box that has power, cooling and connectivity, and you can do whatever you want with that. You can put whatever chip architecture you want in there, and anything else.’ That means we don’t have to pay for the chips. And by far the most expensive part of all this, by the way, is the chips. Much more expensive than the satellite.”

If the arrangement works out the way Johnston envisions, providing utilities in space could be lucrative. He laid out an ambitious roadmap: “The contract is 10 gigawatts of power from 2032 for five years, at 3 cents per kilowatt-hour. That comes to $13.1 billion worth of energy.”

‘Greetings, Earthlings’ from AI

Putting the pieces in place for that business is a primary focus for Redmond, Wash.-based Starcloud, which was founded in 2024 by Johnston, chief technology officer Ezra Feilden and chief engineer Adi Oltean. The co-founders are building on the experience they gained at ventures ranging from SpaceX’s Starlink operation to Airbus and McKinsey & Co.

Starcloud was one of the first startups to look seriously into the idea of using satellites as data centers. Initially, the business model focused on processing data from other satellites before sending it down to Earth, thus economizing on the cost of downlinking the raw data. Now, tech companies are also gauging the benefits of uplinking data to orbital data centers for processing.

The leading companies in AI — including OpenAI, Microsoft, Amazon, Google and Meta — are spending hundreds of billions of dollars on data centers that are increasingly hungry for square footage, electrical power and cooling capacity. That has led the titans of AI, and startups like Starcloud and Sophia Space, to look toward Earth orbit as the next frontier.

Starcloud’s first big move in space came with last month’s launch of Starcloud-1, a 130-pound satellite equipped with an Nvidia H100 chip. Launched by a SpaceX Falcon 9 rocket, the mission aimed to prove that the hardware on Starcloud-1 could process AI data reliably in the harsh radiation environment of outer space.

This month, executives confirmed success. Using the Nvidia chip, Starcloud trained a large language model called NanoGPT, a feat that hadn’t been done in space before. The AI agent was trained on the complete works of William Shakespeare — and so it answered queries in sometimes-stilted Shakespearean English. (For example, “They can it like you from me speak.”)

Starcloud-1 produced better results with a pre-trained version of Gemma, an open-source AI model from Google. When asked for its first statement, Gemma responded with “Greetings, Earthlings! Or, as I prefer to think of you — a fascinating collection of blue and green.”

Former Google CEO Eric Schmidt, who is now executive chairman and CEO of Relativity Space, said in a post to X that Gemma’s performance was “a seriously cool achievement.”

Starcloud gets serious

Coming up with orbital witticisms is only the beginning. “We’re also going to be running some more practical workloads,” Johnston said.

Next year, Starcloud-1’s Nvidia H100 chip will start analyzing synthetic-aperture radar data from Capella Space’s satellite constellation. “The idea is that we can draw insights from that data on orbit and not have to wait a few days to downlink all that data over very slow RF ground-station links,” Johnston said.

Starcloud-2 is due for launch next October, with about 100 times the power-generating capability of its predecessor. It will carry multiple H100 chips and Nvidia’s more advanced Blackwell B200 chip. “We’re also flying some on-premises hardware from one of the big hyperscalers. I can’t say exactly who yet,” Johnston said.

“From there, we scale up to Starcloud-3, which is about a 2-ton, 100-kilowatt spacecraft that will launch on the Starship ‘Pez Dispenser’ form factor,” he said. “So we can launch many of those.”

How many? Johnston envisions a constellation of tens of thousands of satellites in low Earth orbit, or LEO. The satellites would travel in a globe-girdling “train,” with data transmitted from one satellite to the next one via laser links. “We just basically have a laser fixed [on each satellite], and then we very slightly adjust with a very finely tuned mirror. … You have one target that you’re aiming for,” Johnston said.

Johnston said the company has begun the process of seeking a license from the Federal Communications Commission for the Starcloud-3 constellation. The plan also depends on the development schedule for SpaceX’s Starship super-rocket, which would be charged with deploying the satellites.

Starcloud will need funding as well, from investors and from potential customers such as the U.S. Space Force. “We’ve raised about $34 million as of today,” Johnston said. “So we are funded actually through the next two launches at least.” He said the company may consider a Series A funding round in the first half of 2026 to support the development of Starcloud-3.

Starcloud currently has 12 team members. “We could easily triple the size of the team now … but we’ve got some of the most kick-ass engineers in the business,” Johnston said. The company is likely to be looking for a bigger facility next year. “We’ll stay in Redmond, almost certainly,” Johnston said.

Over the past year, industry observers have been debating whether orbital data centers could really offer a better value proposition than terrestrial data centers. But in light of the interest that’s been coming from the likes of SpaceX’s Elon Musk and Blue Origin’s Jeff Bezos, Johnston feels as if the debate has now been settled.

“People seem to trust that if Elon wants to do it, then there must be a sensible way to figure that out,” Johnston said.

Can Starcloud handle the competition from SpaceX or the dominant players in the data center market? Johnston noted that Google recently announced an AI-in-space moonshot called Project Suncatcher, “which is exactly what we’re doing.”

“They’re paying Planet Labs to do a demo in 2027, and as I understand it, the demo they’re doing in 2027 is less powerful than the one we’ve got in orbit — so we have a massive head start against all of those guys, AWS and SpaceX being the exceptions,” Johnston said.

“I think we become an interesting partner for some of those folks,” he added. “And I don’t mean an acquisition target necessarily. I do mean potentially a partner.”

Putting tens of thousands of satellites in low Earth orbit sounds like a job of astronomical proportions. But if everything comes together the way Johnston hopes, Starcloud’s power-generating, data-crunching satellites could go even farther on the final frontier.

“There are many different places you can put them, further away from Earth,” Johnston said. “We’re looking at lunar orbits. We’re looking at some other Lagrangian points — the lunar L1 to Earth, also just the Earth L1. It’s actually less radiation than in LEO.”