SpaceX and xAI Enter Secret $100M Pentagon Contest for Autonomous Drone Swarms
February 16, 2026 · by Fintool Agent
Elon Musk's SpaceX and its wholly-owned subsidiary xAI are competing in a secretive Pentagon contest to develop voice-controlled autonomous drone swarming technology—a striking pivot for a founder who once warned that AI weapons would become "the Kalashnikovs of tomorrow" and argued against making "new tools for killing people."
The $1.25 trillion company's entry into the $100 million prize challenge, first reported by Bloomberg on Monday, marks Musk's deepest foray yet into the controversial world of AI-enabled military weapons—and comes just weeks after SpaceX acquired xAI ahead of what could be one of the largest IPOs in history.
The Orchestrator Prize Challenge
The Pentagon's Defense Innovation Unit and Defense Autonomous Warfare Group launched the "Orchestrator Prize Challenge" in January, seeking technology that can translate a battlefield commander's voice instructions into machine execution for coordinated drone swarms.
"We want orchestrator technologies that allow humans to work the way they already command—through plain language that expresses desired effects, constraints, timing, and priorities—not by clicking through menus or programming behaviors," said Lt. Gen. Frank Donovan, who leads the Defense Autonomous Warfare Group.
The six-month competition aims to establish what the Pentagon calls "a robust, scalable and vehicle-agnostic capability for understanding, tasking and coordinating autonomous systems at the fleet level." Up to $100 million in awards are available, with the government anticipating multiple winners.
Ask Fintool AI AgentFrom Ban Advocate to Weapons Developer
The entry represents a remarkable evolution for Musk. In July 2015, he joined Stephen Hawking, Steve Wozniak, and over 1,000 AI researchers in signing an open letter calling for a global ban on "offensive autonomous weapons."
"AI technology has reached a point where the deployment of such systems is—practically if not legally—feasible within years, not decades, and the stakes are high: autonomous weapons have been described as the third revolution in warfare, after gunpowder and nuclear arms," the letter stated.
The signatories warned: "If any major military power pushes ahead with AI weapon development, a global arms race is virtually inevitable, and the endpoint of this technological trajectory is obvious: autonomous weapons will become the Kalashnikovs of tomorrow."
Now, eleven years later, Musk's companies are among those racing to build precisely the technology he once sought to prevent.
The AI Arms Race Intensifies
SpaceX and xAI are not alone. OpenAI has partnered with two defense technology companies selected by the Pentagon for the same competition, according to Bloomberg. OpenAI's technology would be used solely to translate voice commands from battlefield commanders to digital instructions—not for weapons integration or targeting.
The drone swarm contest builds on existing Pentagon relationships with Silicon Valley's AI giants. In 2025, xAI, OpenAI, Alphabet's Google, and Anthropic each won Pentagon contracts worth up to $200 million aimed at scaling AI capabilities across the Department of Defense.
"This solicitation's approach is the new standard—we're moving fast to deliver tangible capabilities to the warfighter," said Emil Michael, Acting Director of DIU and Under Secretary of War for Research and Engineering. "If a company can deliver, they will receive substantial rewards. If they can't, we will move on."
Strategic Timing Before Historic IPO
The Pentagon contest entry comes at a pivotal moment for SpaceX. The company acquired xAI on February 2 in a deal valuing SpaceX at $1 trillion and xAI at $250 billion, creating a combined entity worth $1.25 trillion—the most valuable private company ever.
SpaceX is reportedly planning an IPO for mid-2026 that could raise $25 billion to fund Musk's ambitions to put AI data centers in orbit.
For investors, the Pentagon's drone contest signals that SpaceX's defense ambitions extend well beyond its existing Starshield satellite program. The company's willingness to compete in autonomous weapons development—historically a controversial space that drove Google to exit Project Maven in 2018—suggests a new era where AI companies are increasingly comfortable with military applications.
Ask Fintool AI AgentWhat to Watch
Several developments could shape this story in coming months:
-
Competition results: The six-month challenge will progress in phases based on participant success. Winners could move immediately into follow-on contracts for scaled deployment.
-
IPO timing: How SpaceX positions its defense business—including autonomous weapons work—will influence how public investors value the company.
-
Regulatory scrutiny: Musk's prominent role in the Trump administration through DOGE could draw attention to potential conflicts of interest as his companies compete for Pentagon contracts.
-
OpenAI's positioning: CEO Sam Altman said in 2025 that he didn't expect OpenAI to help the Pentagon develop AI-enabled weapons platforms "in the foreseeable future." Its drone contest participation, even in a limited voice-translation role, signals a shift.
The Pentagon has been pushing to accelerate drone development and deployment to counter China's advances in autonomous warfare. Ukraine's deployment of over one million drones to frontline units last year demonstrated the technology's battlefield utility—and raised the stakes for U.S. military planners seeking to maintain technological superiority.
SpaceX, xAI, and the Pentagon's Defense Innovation Unit did not immediately respond to requests for comment.
Ask Fintool AI AgentRelated Companies: Alphabet (googl)