The Department of Defense has begun leasing land on military installations to private developers for the construction of hyperscale data centers. The initiative follows an executive order issued by President Donald Trump directing the military to facilitate these partnerships to expand cloud computing and artificial intelligence capabilities. In March, the Carlyle Group and CyrusOne were selected to develop facilities at Fort Bliss in Texas and Dugway Proving Ground in Utah. In May, the Department requested $30 billion in its fiscal year 2027 budget to modernize AI supercomputing infrastructure.
Military officials, including Assistant Secretary of the Army Marc Andersen, stated that these data centers are necessary for national security and the modernization of military logistics and laboratories. Proponents argue that private capital and commercial technology are essential for maintaining a technological advantage on the modern battlefield. The Department of War has already utilized commercial AI systems, such as Grok from Elon Musk’s xAI, for targeting operations during military exercises, according to Chief Digital and Artificial Intelligence Officer Cameron Stanley.
The project has faced criticism regarding its impact on local resources and the environment. Reports indicate the proposed Fort Bliss facility could require more electricity than the city of El Paso. Under the doctrine of sovereign immunity, federal land is often exempt from certain local and state pollution regulations. Shayna Lewis, Deputy Director of Win Without War, stated that these projects could shift infrastructure and pollution costs onto local communities. In response to these concerns, Rep. Rashida Tlaib (D-MI) introduced legislation to prohibit AI data center construction on federal lands.
Legislative efforts to regulate these centers have seen mixed results in Congress. Republican members of the House Appropriations Committee recently rejected amendments that would have blocked the centers or increased environmental oversight. However, Rep. Cory Mills (R-FL) successfully added a provision to the fiscal year 2027 defense authorization bill that prohibits the use of Chinese-built components in these facilities. The Army stated that the Mills provision could discourage private investment, while Rep. Tlaib’s bill remains under consideration as standalone legislation.
The policy creates significant ripple effects across private equity markets, the technology sector, and federal supply chain regulations. By partnering with developers like the Carlyle Group and CyrusOne and integrating commercial systems like xAI's Grok into targeting exercises, the defense sector is deepening its operational reliance on private tech vendors. Simultaneously, legislative actions reflect competing priorities in Congress. While House committee members rejected broader environmental amendments, the inclusion of Rep. Cory Mills's restriction on Chinese-built components introduces new compliance requirements that the Army warns could discourage private capital investment.
Looking ahead, the direction of this strategy depends on upcoming legislative deadlines and federal budget approvals. Congress will weigh these trade-offs as it considers the Department of Defense's $30 billion request for AI supercomputing infrastructure within the fiscal year 2027 budget cycle. Furthermore, the defense authorization bill and Rep. Rashida Tlaib's standalone legislation to ban AI data centers on federal lands will determine the degree of environmental oversight and regulatory boundaries placed on future military-private technology partnerships.