Floating your servers in orbit sounds absurd until you actually think about it. Then it starts making uncomfortable amounts of sense.

That's the argument from veteran technology investor Gavin Baker, who recently laid out why space-based data centers aren't just feasible—they're basically inevitable. Speaking on the 'Invest Like The Best' podcast, Baker explained the economics driving Alphabet Inc. (GOOGL)'s newly revealed "Project Suncatcher" and why OpenAI's Sam Altman has been eyeing SpaceX competitors.

The thesis is simple: AI needs absurd amounts of power and cooling, and Earth is running out of both. Space has infinite quantities of each, just sitting there.

Free Power, Free Cooling

Baker breaks it down to first principles. The two biggest cost drivers for AI data centers are power and cooling. On the ground, you need connections to electrical grids, backup batteries for when things go wrong, and elaborate cooling systems that often involve pumping liquid through server racks. It's expensive, complicated, and increasingly unsustainable as AI workloads explode.

Space flips that equation entirely.

"In space, you can keep a satellite in the sun 24 hours a day," Baker explained. Solar energy up there is "30% more intense" because there's no atmosphere absorbing or scattering light. No clouds, no nighttime, no weather. Just constant, powerful sunlight. And because it never stops, you don't need massive battery arrays for backup power—a major cost on Earth.

Then there's cooling, which might be even more elegant. "Cooling is free," Baker said. "You just put a radiator on the dark side of the satellite… it's as close to absolute zero as you can get." The vacuum of space is basically a perfect heat sink. Point your hot components at the void, let physics do its thing, and you're done.

"In every way, data centers in space… are superior to data centers on Earth," Baker stated flatly.

Faster Connections Than Fiber

Baker's case doesn't stop at energy economics. He also points to a speed advantage that's easy to miss: light travels faster through vacuum than through fiber optic cables.

On Earth, data centers connect their server racks with fiber optics, which is fast but not as fast as it could be. In space, satellites could communicate via lasers shooting through vacuum, theoretically offering lower latency than any terrestrial network.

"The only thing faster than a laser going through a fiber optic cable is a laser going through absolute vacuum," Baker noted.

The Race Is Already On

This isn't theoretical anymore. Alphabet (GOOG) CEO Sundar Pichai recently confirmed the company plans to deploy prototype servers in orbit by 2027. Tesla Inc. (TSLA) CEO Elon Musk responded to the news with a characteristically understated "Interesting."

Meanwhile, OpenAI has reportedly been exploring deals with launch providers like Stoke Space to secure its own path to orbit. When multiple tech giants simultaneously decide something crazy might work, it's worth paying attention.

Launch costs remain the obvious friction point—rockets aren't cheap. But Baker believes the economics are too compelling to ignore. As AI power demands strain utility grids worldwide and cooling systems struggle to keep pace, moving computation off-planet starts looking less like science fiction and more like the logical next step.

The "crazy idea" of space data centers might just be the sanest solution to a problem that's only getting worse.