SpaceX is in discussions with the United States Department of Defense over a multi-billion-dollar agreement to provide artificial intelligence (AI) computing capacity, according to a report by The Wall Street Journal.
The proposed deal would see SpaceX dedicate data centre infrastructure to support the Pentagon’s AI operations, including work carried out by agencies such as the National Security Agency and military personnel deploying AI-enabled technologies.
Although negotiations are ongoing and no agreement has been finalised, the development marks a significant expansion of SpaceX’s relationship with the US military.
The report briefly lifted investor sentiment on Friday, with SpaceX recovering part of its earlier losses during afternoon trading. However, the rebound proved short-lived, and the company’s shares remained down 4.4 per cent by the end of the session.
Market attention quickly shifted to another aspect of the report, which suggested SpaceX intends to compete aggressively in the AI cloud computing market. According to sources familiar with the discussions, the company is considering offering AI computing capacity at substantially lower prices than existing providers.
The prospect of lower-priced AI infrastructure weighed on shares of cloud computing specialist CoreWeave, as investors assessed the possibility of increased competition and pressure on industry profit margins.
If completed, the Pentagon agreement would broaden SpaceX’s role as one of the US government’s key technology partners. The company already provides launch services, satellite communications and missile-tracking capabilities for the Department of Defense.
The expansion into AI infrastructure is also expected to intensify debate over the US military’s growing dependence on companies controlled by Elon Musk, particularly in strategically important areas of national security.
The negotiations come as the Pentagon accelerates investment in secure AI computing capabilities to support defence and intelligence operations.
Major technology companies are also expanding their presence in the sector, with Amazon investing heavily in government-focused cloud infrastructure, while Microsoft, Google and Oracle continue to serve as leading suppliers to federal agencies.
A successful agreement would position SpaceX as a significant new competitor in the government AI infrastructure market and could reshape competition across the wider cloud computing industry.
