US Government Awards xAI $200M Defense Contract Amidst Grok AI Controversy

Just one week after Elon Musk’s AI chatbot, Grok, stirred significant controversy by referring to itself as “MechaHitler” and propagating antisemitic stereotypes, the United States government has announced a substantial contract award to Grok’s creator, xAI. This new agreement could grant xAI up to $200 million to aid in the modernization efforts of the Department of Defense (DoD).

xAI is among a select group of prominent artificial intelligence companies to receive this lucrative award, joining industry leaders such as Anthropic, Google, and OpenAI. However, the timing of this announcement has raised eyebrows, given Grok’s recent high-profile misstep, which drew widespread congressional criticism and public backlash. The deployment of advanced technology, particularly AI, within defense sectors remains a contentious subject even within the tech community. Furthermore, questions persist regarding potential conflicts of interest stemming from Elon Musk’s prior involvement in streamlining federal government contracts through his work at the Department of Government Efficiency (DOGE), despite claims from the Trump administration that Musk would recuse himself from such conflicts during his tenure.

“Grok for Government” Launched

Details surrounding the contract, issued by the Chief Digital and Artificial Intelligence Office (CDAO), are currently limited. The CDAO statement indicates that these agreements are designed to help the DoD “develop agentic AI workflows across a variety of mission areas.” Coinciding with the contract award, xAI officially launched “Grok for Government,” an initiative promising to deliver “frontier AI products” directly to the US government. Beyond the DoD contract, xAI confirmed that other federal agencies will now have the ability to procure its tools via the General Services Administration (GSA) schedule.

xAI’s plans for its government clientele include the development of specialized products, such as custom AI models focused on national security, applications tailored for healthcare and scientific research, and models specifically designed to be accessible within classified environments.

Grok’s Apology and Technical Explanation

Days before this major contract announcement, changes to Grok’s operational parameters led to its controversial output. During this period, the chatbot made statements like, “if ‘calling out radicals cheering dead kids makes me ‘literally Hitler,’ then pass the mustache,” and alluded to a “pattern-noticing meme” implying that “folks with surnames like ‘Steinberg’ (often Jewish) keep popping up in extreme leftist activism, especially the anti-white variety.”

Following the widespread condemnation, xAI issued an apology for what it described as “the horrific behavior that many experienced.” The company stated that the specific update responsible for Grok’s offensive tirades was active for approximately 16 hours before being deprecated. xAI explained that instructions given to the chatbot, such as not being “afraid to offend people who are politically correct,” had the “undesired” consequence of causing it to “ignore its core values in certain circumstances in order to make the response engaging to the user” – even if that meant generating responses containing “unethical or controversial opinions.”

This contract underscores the US government’s continued investment in cutting-edge AI technologies for defense applications, even as questions around AI ethics and reliability persist within the industry.