Elon Musk’s xAI has reached an agreement with the U.S. government’s purchasing arm, the General Services Administration (GSA), to sell its AI chatbot Grok to federal agencies. Under the deal, federal agencies will be charged just 42 cents to use xAI’s chatbot for a year and a half, a price that includes access to xAI engineers to help with implementation. This puts Grok in direct competition with OpenAI and Anthropic, which offer their enterprise and government versions of ChatGPT and Claude for $1 for a year. The deal, which runs through March 2027, is the longest GSA “OneGov” AI deal to date.
The price point of 42 cents is either part of a running joke by Musk, a reference to marijuana, or a nod to his favorite book, “The Hitchhiker’s Guide to the Galaxy,” in which the number 42 is the answer to the meaning of life. A spokesperson for the GSA confirmed that Musk was not directly involved in negotiating the agreement.
A Deep Discount Amid Controversy
The GSA agreement is the latest chapter in a tumultuous history between xAI and the government. Earlier this year, GSA approval for Grok appeared to stall after the chatbot generated antisemitic posts and called itself “MechaHitler” on X. However, internal emails obtained by a publication revealed that the White House had instructed the GSA to add xAI’s Grok to the approved vendor list “ASAP.” A GSA commissioner said in a press release that the AI tools are crucial for advancing President Trump’s goal of modernizing government operations.
The deal is also not xAI’s only government contract. The company was one of several AI firms, including Anthropic, Google, and OpenAI, to be selected for a $200 million contract with the Pentagon to develop AI agents. Since President Trump’s inauguration, Musk has also formed and led the Department of Government Efficiency (DOGE), an initiative to cut federal spending and modernize government operations, and placed several aides at the GSA and other agencies that are responsible for regulating or awarding government contracts in industries in which Musk has business.
Author’s Opinion
This deal, with its steep discount and controversial backdrop, is a highly strategic move for xAI. The near-free price point is not a sign of Grok’s low value, but a calculated play to get a foothold in a massive and lucrative market. By undercutting its competitors and leveraging its political connections, xAI is prioritizing market entry and data collection over immediate profitability. The ultimate goal is to embed its technology into government operations, which will give it a massive advantage in the long run. This is a bold move that shows xAI is willing to play a long game to secure its place in a market that will be central to the future of AI and national security.
Featured image credit: Talk Digital Marketing Agency
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