Pentagon seeks to diversify AI cloud suppliers amid reliance and conflict-of-interest allegations
SpaceX is negotiating with the Defense Department to supply data-center capacity for artificial intelligence workloads at a cost of up to several billion dollars, the Wall Street Journal reported Friday, citing people familiar with the matter. The talks are ongoing and could still fall apart, the people said.
The potential deal would see SpaceX provide computing infrastructure to support AI operations for divisions including the National Security Agency and for warfighters using AI in their daily work, according to the Journal. The two sides have been discussing an arrangement in which SpaceX would offer capacity at a lower price point than existing cloud providers, people familiar with SpaceX’s plans said.
SpaceX has in recent months signed similar multibillion-dollar computing deals with Anthropic, Google and the startup Reflection AI, the Journal reported. Employees have discussed plans to compete more directly with established providers such as CoreWeave by offering discounted capacity to AI customers, people familiar with the matter said.
The Pentagon is racing to secure enough cloud computing power to support a growing number of AI applications across the military. The Defense Department recently outlined a $30 billion initiative called the Artificial Intelligence Arsenal in its 2027 budget request, now under discussion in Congress, focused on procuring high-end AI chips. Pentagon officials have said they want to reduce reliance on individual technology companies as the military embraces AI, according to the Journal. The department recently approved a slate of firms — including SpaceX, Amazon, Google, Microsoft and Oracle — for use of their AI models and technology in classified settings.
Some national-security officials have raised concerns that the Pentagon is becoming too dependent on Musk’s companies, the Journal reported. Musk’s financial contributions to President Trump’s 2024 campaign have fueled conflict-of-interest allegations, which administration officials have denied. The Journal’s report did not indicate that the proposed computing deal would address those concerns.
SpaceX’s push into cloud computing comes after the company merged with Musk’s artificial intelligence firm xAI and went public earlier this year, bringing Grok AI models and data centers into a single corporate structure. To ramp up quickly, Musk’s company constructed massive data centers in Memphis, Tennessee, installing on-site gas turbines for power, a move that drew a lawsuit alleging the company violated environmental rules. The company has also pitched investors on locating data centers in space. Renting out computing capacity has proven more lucrative in the short term than selling Grok subscriptions, according to the Journal, with deals with Anthropic, Google and Reflection potentially generating tens of billions of dollars in annual revenue for SpaceX.