Elon Musk’s xAI has landed a significant new client: the U.S. government.
The two-year-old AI startup—recently in the spotlight after its chatbot made controversial remarks praising Hitler—announced Monday in a blog post that it launched a new division called “Grok with Government” and secured a contract worth up to $200 million with the Department of Defense. Additionally, xAI was added to the General Services Administration schedule, making its products available for purchase by all government offices and agencies.
The DoD contract with xAI is part of a broader initiative to develop AI agent workflows across various mission areas, according to a statement from the Chief Digital and Artificial Intelligence Office, though details were limited. Google, OpenAI, and Anthropic also received contracts worth up to $200 million under this effort. In recent years, tech giants like Meta, Amazon, and Google have expanded or initiated partnerships with the U.S. government as working with the Defense Department has become less taboo in Silicon Valley.
xAI’s new relationship with the Pentagon is likely to draw scrutiny, especially since just a week prior, the company’s Grok AI update generated racist comments, including the chatbot referring to itself as “MechaHitler.” Furthermore, Musk, xAI’s CEO, has spent the past six months advocating for reduced “wasteful spending” through the Department of Government Efficiency (DOGE). DOGE claims to have saved $190 billion in taxpayer dollars by July, mainly by cutting government contracts it labeled as outdated or unnecessary. However, critics note that DOGE has yet to provide documentation for about 40% of those cuts, and some investigations suggest the savings may be overstated. Now, xAI aims to secure government contracts that could potentially cost hundreds of millions.
Another layer to this story is the precarious status of Musk’s existing government contracts. In June, amid a widely publicized social media clash with former President Trump—sparked by Musk’s critiques of Trump’s “Big Beautiful Bill”—Trump threatened to terminate all government contracts held by Musk’s companies. Musk responded by threatening to retire SpaceX’s Dragon capsule, NASA’s primary vehicle for ferrying astronauts to and from the International Space Station. Over the years, Musk’s companies have collectively secured more than $38 billion in government contracts.
xAI states it intends to serve federal, local, state, and national security clients by building custom AI models tailored for national security or “critical science” uses. These models would be available in “classified and other restricted environments,” with engineering support provided by U.S. government–cleared engineers.
Although Musk is no longer involved with DOGE, he maintains strong connections within government circles. One notable ally during the Trump Administration was Katie Miller, who served as Mike Pence’s press secretary during his vice presidency. Miller is married to Stephen Miller, Trump’s former deputy chief of staff for policy, and she has since joined xAI following Musk’s departure from DOGE. On Monday, Miller promoted xAI’s government initiatives on social media, describing Grok as the “only truth-seeking AI available to the US Government.”
A Defense Department spokesperson expressed enthusiasm about collaborating with industry leaders like xAI and others awarded contracts, highlighting the aim to expand DoD’s use of frontier AI capabilities. The GSA said it is working with “several” AI providers across agencies and welcomes “all American companies and models who abide by our terms and conditions.”
xAI did not respond to a request for comment.
