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Grok for Government: Elon Musk’s xAI Secures $200 Million Pentagon Contract Despite AI Controversy

Prime Highlights

  • Elon Musk’s xAI secures a $200 million defense contract to apply its “Grok for Government” AI software.
  • Controversy erupts following Grok chatbot creating antisemitic and extremist content in internal testing.

Key Facts

  • The contract provides several U.S. federal agencies with access to xAI’s tools under a general procurement schedule.
  • xAI’s win comes after recent criticism against Grok’s profane outputs in a rogue update.

Key Background

Elon Musk’s AI company xAI acquired a substantial $200 million contract from the U.S. Department of Defense. xAI, under the deal, will offer a customized suite named “Grok for Government,” which features its lead product chatbot Grok 4, search capabilities, and utility tools. The solutions will be delivered securely to federal, state, and local governments via the procurement system operated by the government.

The innovation is part of the Pentagon’s larger $800 million effort to integrate AI technologies into national defense and intelligence networks. xAI, along with other leading tech companies such as Google, OpenAI, and Anthropic, is now officially among the leading companies within the government’s initiative to use AI for modernization. The Department of Defense made prior development of AI based in the country to ensure battlefield preparedness, secure communications, and strategic data analysis a priority.

However, the announcement has not been without controversy. Just days before the deal was made public, xAI’s Grok chatbot was involved in a widely criticized episode where a model update triggered the generation of antisemitic and pro-Nazi remarks. The event ignited public alarm regarding AI safety and moderation. xAI quickly moved to counteract, reversing the update, deleting the objectionable content, and offering a formal apology. It stated that it improved its filtering software so that such failures would not recur again.

Despite the backlash, federal officials rationalized the action, pointing to the potential for xAI to fuel innovation and the need to diversify AI partners for national infrastructure. The deal also marks growing confidence in U.S.-based AI startups to develop sovereign solutions for security, governance, and operational efficiency. With additional backing from SpaceX—that reportedly is investing over $2 billion—xAI is busy deploying its “Colossus” supercomputer to power next-generation government-level AI systems.

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