Elon Musk's SpaceX in talks to sell Pentagon billions in AI data-centre capacity

Elon Musk’s SpaceX is in discussions with the US Defense Department to offer billions of dollars’ worth of data-centre capacity for running advanced artificial-intelligence models, according to a report by Wall Street Journal. If finalised, the agreement would lead to significant expansion of SpaceX’s role inside America’s national-security infrastructure, where the Pentagon already relies on the company for rocket launches, satellite communications and missile-tracking systems. People familiar with the talks told the WSJ that the arrangement could cost the Pentagon up to several billion dollars, though negotiations are ongoing and could still fall apart. The discussions come as the Defense Department races to secure high-end compute power for agencies such as the National Security Agency, and for frontline military units increasingly using AI in daily operations.SpaceX has recently signed similar cloud‑compute deals with Anthropic and Google, and employees have discussed plans to compete more directly with providers like CoreWeave by offering lower‑cost capacity to AI customers.Pentagon’s AI pushThe Defense Department is seeking $30 billion for a new initiative called the Artificial Intelligence Arsenal, aimed at securing high-end AI chips and compute infrastructure. The major cloud suppliers such as Amazon, Microsoft, Google, and Oracle already offer large portions of the Pentagon’s compute needs. Officials have said they want to avoid over-reliance on any single tech company. Earlier this year, a dispute with Anthropic raised concerns about vendor lock‑in, prompting the Pentagon to approve a slate of firms — including SpaceX — for classified AI model usage.Rapid AI expansion of SpaceXRecently, SpaceX acquired Musk’s AI and went public, bringing Grok AI models and large-scale data centre operations into the company. To catch up in the AI race, Musk oversaw the construction of massive data centers in Memphis, claiming they were built faster and cheaper than competitors. The facilities use on‑site gas turbines for power — a move that triggered an environmental lawsuit.SpaceX has also pitched investors on putting data centers in space, part of Musk’s long‑term strategy to dominate orbital computing.Renting out compute capacity has become more profitable for SpaceX than selling Grok AI models directly. Deals with Anthropic, Google and startup Reflection AI could generate tens of billions of dollars in annual revenue, according to the report. A Pentagon agreement would further cement SpaceX as a central player in America’s AI infrastructure — even as some national‑security officials warn the military may be becoming too dependent on Musk’s companies.Get the latest technology news and updates. Download the TOI App.