FCC Greenlights SpaceX's Orbital AI Data Center: A $50B IPO Catalyst

The immediate market-moving event is the FCC's formal acceptance of SpaceX's application for up to one million satellites for an orbital data center system. The agency opened the proposal for public comment on February 4, 2026, placing the ambitious concept into its official review process. This regulatory green light is a critical first step for a project Elon Musk has framed as foundational to building "orbital data centers."

This approval directly aligns with SpaceX's planned mid-2026 IPO, which aims to raise up to $50 billion at a valuation of roughly $1.5 trillion. The FCC's rapid response, even calling the proposal "preliminary," signals strong regulatory support. The agency accepted the application just days after SpaceX submitted it, a swift move that contrasts with the typical weeks or months of review. This expediency appears driven by both SpaceX's own push for a fast-track license and the FCC's broader strategic priority to accelerate satellite approvals in the context of global competition.

The setup is now in place for a major capital raise. The FCC's action validates the core infrastructure plan for the orbital data center, a key pillar in the company's vision that was recently reinforced by the acquisition of xAI. With the regulatory path cleared for public comment, the focus shifts to the IPO timeline, where the FCC's early backing provides a tangible catalyst for investor confidence.

The Financial Engine: Merging SpaceX and xAI for Orbital Compute

The merger of SpaceX and xAI creates a $1.25 trillion combined entity, a record-setting deal structured as a share exchange. The primary stated rationale is to build "orbital data centers," a long-term vision that frames space as the solution to Earth's mounting problems with power and water for AI compute. Elon Musk argues that space offers unlimited, low-cost renewable energy and a naturally cool environment, positioning orbital compute as the lowest cost way to generate AI compute within 2-3 years.

For now, the financial engine serves a more immediate need: capital. xAI, the AI startup behind the Grok chatbot, is burning through cash at a staggering rate, having reportedly burned about $9.5 billion through the first nine months of 2025. The merger provides a direct platform to serve Musk's AI and space businesses, with the combined entity's massive valuation offering a clear path to fund xAI's infrastructure buildout. This is critical as the AI race heats up, with rivals like OpenAI and Anthropic commanding valuations in the hundreds of billions.

The strategic move leverages investor appetite for AI while solving a capital constraint. SpaceX, which is pursuing a blockbuster IPO later this year to raise up to $50 billion, can now channel that capital into both its core Starlink business and the new orbital compute venture. This merger effectively uses the IPO's valuation to secure the future of xAI, turning a visionary long-term project into a near-term financial reality.

The Big Numbers: Scale, Feasibility, and Market Impact

The proposal's scale is staggering. SpaceX's application calls for up to one million satellites, a figure that represents a roughly 70-fold increase over the current ~14,500 satellites in orbit. This ambition to build a mega-constellation of AI data centers in space is a direct, physical manifestation of the orbital compute vision. The sheer magnitude of the launch cadence required raises immediate questions about feasibility, environmental impact, and the potential for space debris.

The timeline for this vision is long-term. Elon Musk has estimated that orbital data centers won't reach close to parity with terrestrial ones until the 2030s. While the company argues the system will be "the most efficient way" to meet AI capacity needs due to constant solar power, the engineering and economic hurdles are immense. The project is framed as a solution to Earth's power and land constraints for AI, but it remains a distant, capital-intensive endeavor.

Viewed through a financial lens, the primary near-term impact is on narrative and valuation. The FCC's rapid acceptance of the proposal, coupled with the merger and upcoming IPO, creates a powerful story around a revolutionary future. This setup is designed to command a $1.5 trillion valuation for the combined entity. For investors, the orbital data center plan is a high-stakes bet on a future payoff, not a source of immediate revenue. The real catalyst is the IPO's capital raise, which funds the present-day needs of both SpaceX and xAI.