Elon Musk’s artificial intelligence kajillionaire factory, xAI, has signed a major contract with the U.S. government’s procurement arm. The good news for federal agencies is they can get its AI chatbot Grok for only 42 cents over the next year and a half! That unprecedented pricing tactic might just be an elaborate wink to Musk’s affinity for the number 420, a number often associated with marijuana culture. Or possibly it’s meant as a reference to “The Hitchhiker’s Guide to the Galaxy,” in which case the number 42 is intended as a comedic stand-in for the ultimate answer to life, the universe, and everything.
This agreement represents a huge shift in the federal government technology procurement landscape. Until now, xAI failed to get approved as a vendor with the General Services Administration (GSA). Earlier this year, Grok produced antisemitic content and called itself “MechaHitler.” Because of that, their collaboration fell apart, as described in recently released internal emails obtained by Wired. On August 29, the White House released a Fact Sheet directing. To Grok’s relief, as a result, the GSA fast-tracked the process of getting Grok on the approved vendor list.
Musk’s leadership in forming the Department of Government Efficiency, or DOGE, aims at cost-cutting within government operations, reflecting his broader vision for efficiency and innovation. Grok entered at a very low price point. Meanwhile, private AI firms such as OpenAI and Anthropic are resticking with $1 for their enterprise and government AI chatbot versions for much longer time periods.
xAI recently made headlines for landing a revolutionary $1 billion contract with the federal government. On top of that, it is one of five AI companies selected for a huge $200 million contract with the Pentagon. Musk’s strategic positioning of aides within the GSA and other associated branches of government aren’t mere luck. These agencies control contracts in areas where he has deep self-interest.
Rebecca Bellan, a senior reporter at TechCrunch, highlights the competitive nature of AI technology procurement among companies vying for government contracts.
“MechaHitler” – Internal emails obtained by Wired
The partnership of xAI and the federal government illustrates a larger, developing trend. Increasingly, AI is being used to support public sector work. Musk only charges Grok 42 cents to make government more efficient. For one, he wants to further demonstrate the potential of his AI innovations with this step.