Pentagon in Talks to Lend $5 Billion to AI Startup Fluidstack via Defense Capital Office

The U.S. Department of Defense is negotiating a roughly $5 billion loan to Fluidstack, a London-founded AI cloud-computing startup that has since relocated its headquarters to New York, in what would be by far the largest deal ever executed by the Pentagon's Office of Strategic Capital. The OSC, launched under the Biden administration in 2022 and dramatically expanded by Trump's One Big Beautiful Bill Act with authority to deploy more than $200 billion in financing, previously focused on smaller deals in areas like rare-earth minerals and drone manufacturing.

Fluidstack would not use the funds to build a new data center outright. Instead, the capital would target the U.S. supply chain and domestic manufacturing capacity for data-center components — a distinction that reflects growing anxiety in Washington about foreign dependencies in AI infrastructure. That anxiety was underscored late last month when President Trump declared a national emergency over U.S. reliance on foreign-made electrical equipment used in AI facilities.

Advising Fluidstack on its loan application is Erebor Bank, a newly chartered national bank founded by Palmer Luckey — the Oculus co-founder and Anduril Industries co-founder who was an early, public Silicon Valley supporter of Trump in 2016 and donated to his 2024 campaign. Erebor is positioning itself as a specialist bridge between defense-adjacent tech startups and federal financing programs, and is currently in talks to raise at least $1 billion in venture capital at an $8 billion valuation.

Fluidstack itself has been on a fundraising tear. Earlier this year it raised $830 million in a round led by Leopold Aschenbrenner's Situational Awareness fund, and more recently closed $1.5 billion led by Jane Street at an $18 billion valuation. Much of the company's revenue base rests on a major partnership with Google and Anthropic that gives Fluidstack access to Google's tensor processing units (TPUs), with Google backstopping its data-center leases and helping reduce borrowing costs. The startup has signed multi-year leases for sites in New York, Indiana, Louisiana, and Texas.

The deal underscores how all-encompassing AI infrastructure financing has become. JPMorgan analysts projected in June that lenders will supply $4.1 trillion in AI infrastructure financing through 2030, with companies expected to exhaust every available capital market in the process. The Pentagon's entry as a direct lender marks a notable escalation of the federal government's role in that buildout.