en.Wedoany.com Reported - SpaceX is in negotiations with the U.S. Department of Defense (the Pentagon) to lease data center capacity for running artificial intelligence (AI) models. According to the Wall Street Journal, the deal could be worth tens of billions of dollars for the Pentagon, but sources familiar with the matter emphasize that negotiations are ongoing and may ultimately fall through.
This move represents a key business strategy for SpaceX. The company, previously focused on rocket manufacturing, possesses a large amount of underutilized computing power. Elon Musk has rapidly built a data center in Memphis, Tennessee, most of whose capacity is currently idle. According to Bloomberg, Musk's AI startup xAI uses only 11% of the center's total computing power. Selling this excess capacity would provide much-needed revenue for the company, even though it would also directly benefit its competitors.
SpaceX itself has been struggling to achieve profitability, posting a loss of $5 billion last year. Meanwhile, xAI (which was merged into SpaceX before its IPO last month) burned through $6.4 billion over the same period. Additionally, Musk has found it difficult to market his chatbot Grok to enterprises, as its capabilities lag behind market leaders such as Anthropic and ChatGPT.
The backdrop of these negotiations is the deepening relationship between Musk's business empire and the Pentagon. SpaceX has already collaborated with the military to deploy a secret spy satellite network and holds a small contract for experimenting with building rockets capable of delivering military supplies globally. Such collaborations have expanded significantly over the past year: in May, SpaceX won a $2.29 billion contract from the Space Force to build a satellite network that could serve as a military internet service to connect global weapons systems; that same month, SpaceX secured another contract worth $4.16 billion to provide technology for building a system capable of tracking aircraft and missiles from orbit.
Musk's company is not the only tech firm partnering with the Pentagon. According to the Wall Street Journal, Amazon, Google, Microsoft, and Oracle have similar agreements to provide cloud computing capacity and AI models to the military. However, for Musk, this move raises ethical questions: in 2023, when Musk cut off Starlink satellite access for Ukrainian forces, he cited the reason that he did not want SpaceX to be "explicitly complicit in a major act of war and conflict escalation." In June of this year, a Pentagon official boasted that the military used Grok in "Operation Epic Fury" to launch 2,000 missiles at Iran, triggering a war that resulted in thousands of civilian deaths.
SpaceX's financial difficulties are also an important context for the negotiations. The recent failure of a Starship launch was another blow to the company, while SpaceX's stock price faces pressure, with short sellers profiting from the decline. This deal with the Pentagon could become a significant new revenue source for SpaceX amid various financial challenges, but it also sparks ethical debates. It remains unclear when these negotiations might reach a final agreement.
