Jan 21 (Reuters) - Lonestar Data Holdings is reaching

for the moon in its quest to place the first physical data

center on the lunar landscape.

The space startup will use SpaceX's Falcon 9 rocket to

launch a fully assembled data center late next month by

integrating it with Intuitive Machines' ( LUNR ) moon lander, Athena, it

said on Tuesday.

Cheaper rocket launches, abundant solar energy and

cost-effective cooling systems have fueled a race among startups

to transform space into a massive data hub, capable of meeting

the growing computational needs of technologies including AI.

The company is pulling out all the stops to ensure the

mission goes smoothly, Lonestar CEO Chris Stott told Reuters.

"This idea of using earth's largest satellite as an anchor

point, it's far enough that we can have security on

(communications)," Stott said, adding the focus was on disaster

recovery and storage and not on latency-dependent activities.

Lonestar has signed up the State of Florida, Isle of

Man government, AI firm Valkyrie and pop rock band Imagine

Dragons as customers for the data center, called Freedom, which

will be powered by solar energy and use naturally cooled

solid-state drives.

Its operations will also have ground-based backup from data

center firm Flexential's Tampa, Florida facility.

The concept of space-based data centers is gaining traction

as the energy needs to maintain such operations on Earth grow

sharply.

Last month, Lumen Orbit raised $11 million at a $40 million

valuation. Lonestar has raised nearly $10 million with a

valuation of less than $30 million, Pitchbook data shows.

However, hosting data centers in space has its own

challenges, including cumbersome maintenance, limited scope for

upgrades and high costs of launching rockets. There is also the

risk of failed rocket launches.

"When you launch a satellite into space, it's binary. If it

fails, it's dead. There's no way to recover it. There are no

ways to fix it," said Chris Quilty, co-CEO of industry research

firm Quilty Space.

(Reporting by Akash Sriram in Bengaluru; Editing by Anil

D'Silva)