The U.S. Department of War, through the Office of the Under Secretary of War for Research and Engineering (R&E), has announced a broader $350 million quantum technology initiative designed to accelerate national security applications and secure domestic manufacturing for fault-tolerant quantum computing (FTQC). A major component of this package is a conditional loan commitment of up to $150 million from the Department’s Office of Strategic Capital (OSC) awarded to Palo Alto-based photonic hardware developer PsiQuantum. The debt financing is targeted at expanding the company’s 140,000-square-foot advanced manufacturing, testing, and system integration hub (“PsiFactory”) in Milpitas, California. Deploying co-investments alongside federal financing, PsiQuantum aims to secure domestic supply chain capacity for the assembly, testing, and validation of prototype components underpinning its utility-scale architecture.
The conditional commitment from the OSC will support capital expenditure for specialized hardware validation equipment, subassembly integration infrastructure, and advanced cryogenic systems required for large-scale photonic prototype testing. Established to scale private investment in critical defense-critical technology sectors, the OSC’s loan commitment remains subject to final execution pending PsiQuantum’s satisfaction of customary legal, financial, technical, and regulatory due diligence conditions.
| [ Department of War $350M Quantum Initiatives & Facility Portfolio ] | ||
|---|---|---|
| Agency / Program | Funding Outlay & Mechanism | Strategic Mandate & Target Deliverable |
| • Office of Strategic Capital | • Conditional direct loan up to $150M | • Milpitas, CA “PsiFactory” cryogenic testing & prototype manufacturing. |
| • DARPA (QBI Program) | • ~$200M in new Stage C funding allocations | • Independent Verification & Validation (IV&V) of utility-scale hardware concepts. |
| • Cross-Agency Application Workshops | • R&E & DARPA coordination with DOE/NNSA/LPS | • Mission-relevant application identification in chemistry, materials science, & physics. |
| • U.S. Dept. of Commerce | • $100M CHIPS and Science Act award (Sept 2026) | • Onshore semiconductor fabrication & silicon photonics scaling. |
Beyond the OSC loan facility, the Department of War’s $350 million allocation directs DARPA to advance independent verification and validation (IV&V) under Stage C of the Quantum Benchmarking Initiative (QBI). Representing approximately $200 million in new funding commitments across selected industry performers, Stage C transitions evaluation from theoretical blueprint audits to physical hardware testing to verify whether candidate utility-scale concepts can be built as designed. To ground these hardware efforts in defense operations, R&E and DARPA will co-host a series of application workshops starting before January 2027 alongside the Department of Energy (DOE), National Nuclear Security Administration (NNSA), and Laboratory for Physical Sciences (LPS) to target mission-critical use cases in chemistry, materials science, and physics.
The OSC commitment follows a series of capital awards and infrastructure developments for PsiQuantum across the U.S. public sector, including a $125 million expanded contract under DARPA’s QBI program in July 2026 and a definitive $100 million CHIPS and Science Act award in September 2026. Internationally, the company continues construction on its Moreton Bay Central utility-scale facility in Queensland, Australia, alongside its U.S. anchor site at the Illinois Quantum and Microelectronics Park in Chicago.
Review the release via the PsiQuantum Newsroom here, examine official program terms on the U.S. Department of War Release Portal here, inspect DARPA’s evaluation framework via the DARPA QBI Stage C Announcement here, and read our previous coverage on PsiQuantum’s $125 million DARPA QBI expansion here, PsiQuantum’s $100 million CHIPS Act award here, the Moreton Bay Central facility groundbreaking here, and the Illinois Quantum and Microelectronics Park site here.
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