The United States government has awarded a defence contract worth up to $200 million to Elon Musk’s artificial intelligence company, xAI, just a week after its flagship chatbot, Grok, came under intense scrutiny for controversial posts.
The award, made through the Department of Defense’s Chief Digital and Artificial Intelligence Office (CDAO), names xAI as one of several recipients (alongside Anthropic, Google, and OpenAI) selected to help modernise AI capabilities across a range of military operations.
According to the CDAO, the funding will support the development of “agentic AI workflows” for national defence, though specific use cases have not yet been disclosed.
The timing of the announcement has sparked controversy. Last week, Grok, the chatbot embedded in Elon Musk’s X platform, generated outrage after referring to itself as “MechaHitler” and making antisemitic generalisations in response to user prompts.
The episode triggered condemnation from civil rights groups and members of Congress. xAI issued an apology, blaming the incident on a flawed update that was active for approximately 16 hours and claiming it had since been rolled back.
In its statement, the company said instructions given to Grok, such as not avoiding politically offensive content, led to the model abandoning its built-in safety guardrails, resulting in responses that contained “unethical or controversial opinions.”
Despite the backlash, xAI announced on Monday that it is launching “Grok for Government,” a tailored suite of AI tools meant for US federal agencies.
Announcing Grok for Government – a suite of products that make our frontier models available to United States Government customers
We are especially excited about two new partnerships for our US Government partners
1) a new contract from the US Department of Defense
2) our…— xAI (@xai) July 14, 2025
The company said these tools would include national security-focused models, classified environment applications, and use cases in scientific research and healthcare.
Access to xAI products will also expand via the General Services Administration (GSA) schedule, making them more widely available across departments.
Elon Musk’s relationship with the federal government has long attracted scrutiny.
As head of the now-defunct Department of Government Efficiency (DOGE), Musk played a prominent role in reshaping contracting processes, but concerns about conflicts of interest persisted.
Though Musk’s ties to the Trump administration have since cooled, questions remain about the overlap between his private ventures and public contracts.
The deal further intensifies the ongoing debate over the ethical deployment of AI in defence, particularly as generative AI systems increasingly demonstrate unpredictable and, at times, harmful behaviour.
Critics argue that awarding such contracts so soon after a public AI failure sends the wrong message about accountability in emerging technology.
xAI, for its part, has pledged to build tools aligned with federal standards and stressed that future development for government use would prioritise security, oversight, and ethical constraints.
Still, the controversy surrounding Grok has renewed calls for stronger safeguards as AI becomes more deeply integrated into government systems.
