SpaceX Could Provide the Pentagon with Computing Power: Here's How Elon Musk Plans to Capitalize on Investments
SpaceX is conducting confidential negotiations with the United States Department of Defense (DoD) to grant the military agency access to its data center infrastructure for running and training artificial intelligence models. According to sources close to the dossier reported by the WSJ, the economic value of the agreement under discussion is estimated to be in the billions of dollars, although negotiations are still ongoing and the risk of a failed agreement cannot be ruled out.
This initiative represents a further acceleration in SpaceX's strategy to diversify into the cloud services and High-Performance Computing (HPC) market. In recent months, the company led by Elon Musk has signed significant commercial agreements with players such as Anthropic, Google, and the startup Reflection AI, laying the groundwork for an expansion aimed at directly competing with specialized providers such as CoreWeave. Internal sources indicate that the business strategy involves offering computing power at significantly more aggressive prices compared to current market standards.
The operational base for this new compute division stems from the recent corporate reorganization that saw SpaceX complete the acquisition of xAI and subsequently enter the stock markets with an IPO. With this operation, models from the Grok family and their associated hardware resources flowed directly into SpaceX's framework.
To support the high energy and computing demand of the AI race, the company has built an enormous data center in record time in Memphis, Tennessee, called Colossus 2. As stated in SpaceX's public documents, the construction of the facility was completed at lower costs and time compared to competitors, also thanks to the on-site installation of dedicated gas turbines for electric generation—though this choice has triggered legal disputes related to alleged violations of local environmental regulations. Meanwhile, the company has presented investors with long-term plans related to positioning data centers directly in orbit.
On the financial side, the business model based on renting out raw computing capacity (IaaS/HPC) is proving to be significantly more profitable in the short term compared to the direct monetization of Grok models. The agreements reached could ensure SpaceX annual revenues estimated in the tens of billions of dollars.
A potential contract with the U.S. Defense would solidify an already deep strategic link. For years, the Pentagon has relied on SpaceX for launching payloads via Falcon rockets and for managing satellite connectivity and missile tracking. However, Musk's growing centrality in national security infrastructure has raised concerns among some industry officials, along with criticism regarding potential conflicts of interest stemming from substantial financial contributions made by the manager for President Trump's 2024 campaign; accusations that administration representatives have formally denied.
For its part, the Department of Defense is implementing an intense campaign to procure cloud resources to support the operational needs of the NSA (National Security Agency) and the field deployable operational units. The primary stated objective of military leaders is to avoid vendor lock-in and reduce reliance on individual suppliers—a concern heightened by recent frictions with Anthropic. Recently, the DoD authorized the use of models and technologies from SpaceX, Amazon, Google, Microsoft, and Oracle for use in classified environments.
The overall financial commitment of the American Defense towards artificial intelligence is reflected in the request for $30 billion allocated to the "Artificial Intelligence Arsenal" program, presented within the budget requests for the fiscal year 2027 currently under consideration by the U.S. Congress. In this context, historical cloud suppliers of the Defense, such as Amazon (which has planned investments of $50 billion in the government sector), Microsoft, Google, and Oracle, will find themselves facing SpaceX’s new and aggressive positioning.