Oracle's Pentagon Breakup: Did Musk Pull the Plug?
A very strange thing just happened inside the Pentagon.
Defense Secretary Pete Hegseth personally oversaw the cancellation of Oracle's major defense contract — a deal worth tens of millions. The official explanation? The project was six years late and more than $280 million over budget. But everyone in the room knows that's not the full story — these cuts only happen after a DOGE check. And that raises a question: Elon Musk is supposed to be Larry Ellison’s friend. So why did Oracle get cut?
This may just be the beginning.
Oracle still holds a $16 billion contract with the Department of Veterans Affairs. But after this move? That deal might not be safe either.
Larry Ellison used to be untouchable in Washington. CEO Safra Catz served on Trump’s transition team. Ellison is one of the GOP’s most loyal donors. Oracle was deeply entrenched in federal IT deals. And yet, they just got tossed aside by a Defense Secretary handpicked by Trump himself.
There’s another layer to this: xAI quietly scaling back its use of Oracle’s cloud. Musk was one of Oracle’s biggest customers, leasing 24,000 H100s through them. Then he started building his own supercomputer in Memphis. Oracle’s earnings? They started showing cracks — EPS came in at $1.47 vs. $1.49 expected, and revenue missed at $14.13B vs. $14.39B.
But that wasn’t the loudest signal.
Ellison joined Sam Altman and SoftBank on the $500 billion Stargate project. Musk didn’t like that — at all. He’s currently suing Altman and publicly mocked SoftBank’s ability to fund anything. The timing? Suspiciously perfect.
People forget: one tweet from Musk forced law firm Skadden to offer $100 million in pro bono legal services to the White House. He publicly chastised Lockheed Martin, claiming wars are now won with drones, not fighter jets — and guess what? Lockheed lost the next Pentagon contract. Boeing got it instead.
This isn’t just media power. Musk can move policy, budgets, and now, defense contracts.
Ellison once sat on Tesla’s board. He backed Musk publicly. They seemed aligned in both business and politics. So what changed?
Maybe it was Altman. Maybe it was power. Maybe it was simply who controls the future of AI infrastructure.
Whatever it was — Oracle is now the first big tech name with political clout to get kicked out of the Pentagon’s inner circle. More may follow.
This isn’t just a contract dispute. It’s a reordering of the AI-industrial complex. Oracle’s influence is slipping. Musk’s is rising. And the money is being redistributed in real time.
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This publication is for educational and informational purposes only and does not constitute financial, investment, or trading advice. Readers are solely responsible for their own investment decisions. The author may hold positions in the securities mentioned.