US Army taps Carlyle and KKR to build $2bn data centers as AI warfare demands skyrocket

Army Taps Private Capital to Build Data Centers on Its Bases

The US Army has announced the first group of companies that will build data centers on military bases, as the armed forces address a growing need for artificial intelligence computing power. The Army plans to work with Carlyle Group Inc. to build a data center at Fort Bliss in Texas, and KKR & Co.-backed data-center operator CyrusOne to construct another at Dugway Proving Ground, Utah, Army Secretary Dan Driscoll told reporters. Each project is expected to involve the companies investing billions of dollars. The centers will be built on underused Army land through 50-year leases, allowing private developers to finance construction and operations in exchange for access to computing power. "We just have massive demands," Driscoll said. "This is the first of many, many projects that we hope to announce." President Donald Trump signed an executive order in December to restrict state-level regulation, the latest in a series of steps he's taken to bolster the AI industry since his return to the White House. Those moves are intended to make it easier to build infrastructure and increase energy supply for data centers. David Fitzgerald, the senior official performing the duties of under secretary of the Army, said this new model was designed to avoid boom-and-bust spending cycles tied to government budgets. Instead, the private sector will invest billions to set up shop on Army land. The Fort Bliss campus-style center would be set across roughly 1,384 acres and is being structured to generate its own energy and a closed water system to avoid stresses on local communities. The center, he said, would bring 2,000 new jobs to the El Paso region. The Dugway-based center would be built on a 1,200 acre parcel, anchoring more economic activity in a remote region. The AI drive has emerged as a politically contentious issue in November midterm elections, as voters bristle over the rapid development of data centers in their communities, energy use that's driving up utility costs, potential job losses from the technology and worries about environmental harm.

Carlyle and KKR to build two data centres for US Army at a cost of $2bn each

The US Army has selected Carlyle and KKR to build two data centres on military bases estimated to cost $2bn each as the service's use of AI has skyrocketed during the war in Iran. The army will provide long-term leases to the firms, which are responsible for building and operating the centres, as part of the Trump administration's efforts to deepen ties with the $13tn private capital industry. The army will not invest in the project. US Army secretary Dan Driscoll said the conflict in Iran encapsulates the military's growing need for data centres as AI plays a greater role in modern warfare, though the infrastructure tie-up plans predate the war. "The amount of tokens the United States Army is using right now on these AI platforms has gone up by 8x in the last couple of weeks," said Driscoll, referring to the units of data processed by AI models. It takes about 1,300 tokens to generate 1,000 words of text. The Pentagon is locked in a dispute with Anthropic about the terms governing the military use of its AI models. The start-up's Claude model is so far the only one known to have been used in classified operations, although OpenAI signed a contract with the defence department earlier this month. Carlyle will build a 2.5 to 3 gigawatt data centre on roughly 1,384 acres at Fort Bliss, a base in El Paso, Texas. It was expected to begin operating at 200 megawatts in 2027, with full operational capacity forecast for 2028, according to David Fitzgerald, deputy under-secretary of the US Army. KKR, one of the world's largest data centre owners, will use its portfolio company CyrusOne, jointly owned with BlackRock, to build a 1GW data centre on 1,201 acres at Dugway Proving Ground in Utah. It is expected to be up and running in 2029. As part of the deal, the army will receive a certain percentage of the data centres' capacity to use exclusively. The army currently spends hundreds of millions of dollars on data centre usage annually, said Fitzgerald. The computing power it does not use will be sold by Carlyle and KKR to commercial customers. The army and the private capital groups do not yet have final agreements, but are negotiating exclusively. Driscoll and Fitzgerald said they expect the army to enter into more deals like the ones they were negotiating with Carlyle and KKR. "We just have massive demands when our soldiers are under air and missile threats coming at them from all sorts of directions," Driscoll said. Such demands are expected to grow as warfare increasingly relies on data, AI and computational resources to process data and train models. Driscoll said that the computing power needed to fight drone swarms and launch attacks "require[s] a whole different set of infrastructure", such as what the Fort Bliss and Dugway projects would produce. Building more of them would be crucial for any conflict with China, he added. The army wants to develop skills and expertise with such data centres in the continental US with the aim of replicating them globally. The goal is that "in a contested environment, we can actually go build a lot of these things in the theatres where our soldiers are", Driscoll said. He said the army was working towards having its own computing capacity in the Indo-Pacific region by the end of President Donald Trump's term. Driscoll said this use of private capital would be a model for other ventures. "We may create an investment vehicle where the army is co-investing to own a mine, and then the output of that mine is being processed on the army base" and then used to make weapons components.