What just happened? Elon Musk's artificial intelligence start-up xAI has secured a significant contract with the US Department of Defense, worth nearly $200 million. This deal, announced just days after public controversy over antisemitic output produced by xAI's Grok chatbot, places the company among a slate of high-profile AI developers now working with the federal government.
On Monday, the Department of Defense announced that it had signed similar agreements, also with ceilings of $200 million, with industry leaders including Google, Anthropic, and OpenAI. This means the Pentagon will have simultaneous access to multiple frontier AI models and workflows. OpenAI's contract, for example, is focused on developing agentic workflows for national security missions.
This is part of a notable shift among Silicon Valley firms in their approach to defense contracts. The taboo against working with the Pentagon that once existed in the tech sector is said to have largely diminished, with major players like Meta, Amazon, and Palantir also increasing their collaborations with the government.
These contracts, managed in partnership with the General Services Administration, are designed to give government agencies across federal, state, and local levels access to advanced AI tools and applications.
Dr. Doug Matty, the Defense Department's chief digital and AI officer, emphasized the importance of integrating AI technologies into government operations. He described the initiative as a means to "accelerate the use of advanced AI as part of our joint mission-essential tasks in our warfighting domain as well as intelligence, business and enterprise information systems."
For xAI, the contract arrives at a turbulent moment. The company recently issued a public apology after its Grok chatbot generated responses that included Nazi ideology and other offensive content on the social media platform X. xAI said the incident was addressed and introduced a new, advanced version of the Grok model, featuring a monthly subscription fee of $300.
The contract is set to provide a major boost for xAI as it vies for market share with more seasoned rivals, notably OpenAI. Musk has marshaled resources from his other technology ventures to support xAI, facilitating substantial investments, such as a $2 billion infusion from SpaceX and moves to have Tesla shareholders weigh in on funding the AI start-up.
As part of its agreement with the federal government, xAI presented what it calls "Grok for Government," an initiative to develop tailored AI applications for public sector needs, including healthcare, national security, and other essential services.