SpaceX in Talks to Provide Multi-Billion Dollar AI Data Center Capacity to U.S. Defense Ministry

The Wall Street Journal reported on Monday that SpaceX is negotiating with the U.S. Department of Defense to provide data center capacity for AI model operations, with the deal valued in the tens of billions of dollars. The negotiations are ongoing, though WSJ noted they could be stalled. SpaceX has been rapidly expanding its cloud computing business, recently securing contracts similar to those of Anthropic and Google. Employees have discussed offering lower prices to AI clients to compete directly with existing providers like CoreWeave. The Defense Ministry has actively pursued cloud infrastructure to support AI capabilities, partnering with Microsoft, Google, and Oracle. It aims to reduce reliance on specific tech firms by approving SpaceX, Amazon, Google, Microsoft, and Oracle for classified AI use. The ministry also requested a $30 billion budget for its new 'AI Arsenal' initiative focused on advanced AI chips. While the Pentagon has long relied on SpaceX for rocket launches and satellite operations, concerns exist about over-dependence on Musk's services, amplified by his recent donations to Trump's 2024 campaign. SpaceX's acquisition of xAI and integration of Grok AI models and data centers could position computing capacity rental as a more profitable short-term strategy, potentially generating hundreds of billions in annual revenue.