Pentagon Negotiates $5 Billion Loan to Fluidstack

The Wall Street Journal reports, citing informed sources, that the Pentagon is negotiating a loan of approximately $5 billion to AI cloud company Fluidstack, with funds expected to come from the Strategic Capital Office, marking the largest loan from this office to date. A Defense Department spokesperson stated that they do not comment on ongoing or undisclosed transactions; neither the company nor the department immediately responded to Reuters' inquiries. Terms, interest rates, and the final amount are still subject to change.

The loan is designated for supply chain purposes rather than for opening a new training facility. Reports indicate that the funds will be used to strengthen the manufacturing and capacity of components related to U.S. data centers, reinforcing domestic supply rather than directly covering the total cost of a new facility. Last month, the president signed an executive order declaring a national emergency and restricting certain foreign equipment from entering the U.S. power grid that supplies data centers, with negotiations occurring after this ban.

The Strategic Capital Office was established during Biden's administration, with previous transactions focused on much smaller national security niches: companies like Vulcan Elements and Phoenix Tailings in rare earths and critical minerals, as well as drone company Unusual Machines and Sequoia-backed Neros. The $5 billion loan elevates this office from supplemental industry loans to the main table of AI infrastructure financing. The advisory firm is Erebor Bank, founded by Palmer Luckey, who has publicly supported Trump as an Oculus and defense tech entrepreneur.

Fluidstack was founded in London in 2017 and plans to relocate its global headquarters to New York by December 2025, expanding data centers in New York, Indiana, Louisiana, and Texas. Earlier this year, it raised approximately $830 million in Series A funding, with a valuation of about $7.5 billion, followed by a $1.5 billion financing led by Jane Street, bringing its valuation to over $18 billion; other reports indicate it has loaded over $15 billion in project debt with partners. The Indiana data center issued approximately $5.7 billion in senior secured notes, with a 15-year lease that Google can take over or pay a termination fee when Fluidstack exits. The Louisiana River Bend lease for Hut 8 is nominally about $7 billion for 245 megawatts, with options exhausted or down to $1.77 billion, also backed by Google and embedded with a larger power collaboration with Anthropic.

Google's guarantee is central to this leverage. Fluidstack's arrangements with Google and Anthropic turn lab orders into financeable long-term leases: if the company cannot fulfill its obligations, Google will take over the lease or pay termination fees, allowing the debt market to offer lower interest rates. Anthropic has also entrusted Fluidstack with approximately $50 billion worth of U.S. computing infrastructure to customize data centers in New York and Texas. The company previously borrowed from Macquarie and others using GPUs as collateral, a path similar to CoreWeave.

The market mechanism is sovereign credit entering new cloud leverage. The buy-side is the Defense Department wanting to domesticize grid equipment into executable capacity; the sell-side is Fluidstack needing to separate component manufacturing from project financing. Funds flow from the Strategic Capital Office loan account into supplier factories rather than directly converting into watts. Beneficiaries are the electrical and cooling supply chains needing domestic alternatives, as well as underwriting advisors treating defense loans as credit enhancement; pressured parties are foreign manufacturers still supplying grid equipment to U.S. data centers and independent developers needing to redo their lists under the ban. The event driver is exclusive reporting, with the deal not yet signed.

The Pentagon has already allowed companies like Google, OpenAI, Nvidia, Microsoft, Amazon, and SpaceX to deploy models on secure networks. This negotiation extends the same security logic from software licensing to data center components.

Source: Public Information