According to reports from the Wall Street Journal, SpaceX is in ongoing discussions with the US Department of Defense to provide access to data center capacity worth billions of dollars for running AI models. The talks represent a significant expansion of SpaceX's business beyond its traditional aerospace operations into the high-value computing infrastructure market. As per the Wall Street Journal, the two sides are negotiating an arrangement under which SpaceX would provide computing capacity to the department at a cost of up to several billion dollars. However, talks could collapse with no deal, indicating the preliminary nature of these negotiations. The partnership model for this deal is similar to previous agreements SpaceX reached with Alphabet's Google and AI firm Anthropic, as reported by TradingKey.
As reported by the Wall Street Journal, SpaceX employees have discussed plans to compete more directly with neocloud firms such as CoreWeave by selling computing capacity to AI customers at lower prices. This strategic approach would position SpaceX to offer competitive pricing while leveraging its existing infrastructure capabilities in the rapidly growing AI computing market. The company is planning a major expansion of its cloud-computing efforts, including competing directly with providers like CoreWeave by offering its computing capacity at lower prices. SpaceX would join Amazon, Microsoft, Google, and Oracle in providing capacity to the Pentagon, with the potential deal giving the United States Department of Defense more cloud-computing resources to support AI applications across the National Security Agency and warfighters.
According to TradingKey, SpaceX has already secured several major contracts in the commercialization of computing power. In June this year, Google agreed to pay SpaceX $920 million per month to purchase computing capacity, a cloud services agreement that will run through mid-2029. In the same month, Anthropic also reached an agreement to pay SpaceX $1.25 billion per month to acquire computing power to support the operations of its Claude artificial intelligence software. From these two contracts alone, SpaceX's monthly computing power revenue exceeds $2.17 billion. The company has also signed cloud-computing deals with Anthropic, Google, and Reflection AI in recent months to rent out data-center capacity for running AI models, with all contracts including flexibility clauses allowing early termination.
SPCX shares closed down 5.43% to $123.99 as of Friday's U.S. stock market close, marking the sixth consecutive day in the red. The stock closed below its IPO price of $135, though it had surged after completing its historic initial public offering last month. Despite short-term pressure on the stock price, Wall Street analysts overall remain bullish about SpaceX's prospects. As of July 17, 29 analysts have rated SpaceX, with the highest target price at $800, representing approximately 545% upside from the current price, while the lowest target price is $115, implying a downside of about 7%. The average target price stands at $243.81, reflecting significant upside potential. Some optimism stems from Elon Musk's ongoing implementation of infrastructure partnerships, driving the AI computing power segment from internal use toward external commercialization.
