SpaceX in Talks for Pentagon AI Deal, Sparking Price War Concerns for CoreWeave

Shares of cloud-computing provider CoreWeave fell on Friday following a report that SpaceX is in talks to supply the Pentagon with billions of dollars in AI computing power, a move that could spark a price war in the sector. While the news provided a brief lift to SpaceX's stock, the shares ultimately closed lower, according to The Wall Street Journal, which first reported the discussions.

Market Reacts to Competitive Threat

According to the report, the potential multi-billion-dollar deal would involve SpaceX providing dedicated data-center capacity for the U.S. Department of Defense to run artificial intelligence models. While the news briefly boosted SpaceX shares intraday, the stock failed to hold its gains and finished the session down 4.4%.

The more significant market reaction was seen in shares of CoreWeave, which slid into negative territory. The pressure on the stock stemmed from details suggesting SpaceX intends to compete aggressively on price. Sources cited by the Journal said SpaceX employees have discussed offering AI capacity at significantly lower prices than established providers, raising investor concerns about a potential margin-compressing price war.

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Deepening Pentagon Ties

Negotiations are reportedly ongoing, and an agreement is not guaranteed. If finalized, the deal would significantly expand an already deep-seated relationship between the Pentagon and Elon Musk's aerospace company, which provides critical services for rocket launches, satellite communications, and missile tracking.

This potential expansion into AI infrastructure comes amid a broader push by the Defense Department to secure computing power for agencies like the National Security Agency and for operational battlefield AI. The move places SpaceX in direct competition with entrenched government cloud suppliers like Amazon, Microsoft, Google, and Oracle in a rapidly escalating market.