Elon Musk has warned that scaling artificial intelligence (AI) on Earth will hit a massive “hardware wall,” revealing that it is nearly impossible to build and scale new AI data centres anywhere outside of China due to a severe global electricity shortage. Speaking to podcaster Dwarkesh Patel and John Collison, the Tesla and xAI founder stated that while the production of advanced AI chips is growing exponentially, the world’s electrical grids are completely stagnant.“The availability of energy is the issue,” Musk explained to Dwarkesh Patel in an interview clip Tesla CEO shared recently, adding, “If you look at electrical output outside of China... it’s more or less flat. Very slight increase, but pretty much flat.”According to Musk, China is the only country rapidly increasing its electrical output to match the intense demands of the AI boom. He raised a blunt warning for competing Western tech firms: “If you're putting data centers anywhere except China, where are you going to get your electricity? Especially as you scale... How are you going to turn the chips on? Magical power sources? Magical electricity fairies?”Difficult to scale AI data centres on Earth than in SpaceWhen asked why tech companies don’t simply build massive green-energy projects to power their facilities, like covering the Nevada desert in solar panels, Musk pointed directly to bureaucratic roadblocks and regulatory red tape on Earth.“Try getting the permissions for that. It's harder to scale on land than it is in space. Space is really a regulatory play," Musk said. Beyond the local opposition and permitting delays holding up data centre construction on the ground, Musk argued that traditional Earth-based solar power suffers from environmental limitations like clouds, seasons, atmospheric energy loss, and the heavy cost of using batteries to keep data centers running through the night.Musk’s prediction: AI is moving to space in 30 monthsDue to these earthly limitations, Musk dropped a prediction: within the next 30 to 36 months, space will become the cheapest and most economically compelling place to run AI. Musk outlined several major advantages to launching GPU data centers into orbit. One of those is increased solar efficiency because of the absence of an atmosphere to block light.Musk says that Earth’s atmosphere accounts for a 30% energy loss on Earth, and with no weather cycles or nightfall, a solar panel in space generates roughly five times more raw power than it does on the ground. The second is no battery overhead as space-based solar arrays can catch constant sunlight, orbital data centres completely eliminate the massive costs associated with grid-scale backup batteries. Finally, Solar cells bound for space do not require heavy framing or thick protective glass because there is no wind, rain or hail in orbit, making them lighter and cheaper to build.