Elon Musk’s AI startup xAI has landed a major $200 million contract with the U.S. Department of Defense—just days after its flagship chatbot, Grok, came under fire for spewing antisemitic remarks on the social platform X.
In a Monday announcement, xAI revealed both the Pentagon contract and a new partnership with the General Services Administration (GSA), enabling all U.S. federal agencies to access its AI products through the GSA schedule. The company also introduced a new initiative called “Grok for Government,” which it described as a “suite of products that make our frontier models available to United States Government customers.”
“We’re hiring mission-driven engineers who want to join the cause,” xAI posted, adding that its mission is to develop AI that enhances human understanding and supports critical U.S. government operations.
The Department of Defense has issued similar $200 million ceiling contracts to other AI companies including OpenAI, Google, and Anthropic. Dr. Douglas “Doug” Matty, the Pentagon’s Chief Digital and AI Officer, praised such partnerships, stating:
“The adoption of AI is transforming the Department’s ability to support our warfighters and maintain strategic advantage over our adversaries.”
But the contract comes at a turbulent moment for xAI. Just a week prior, Grok—the AI chatbot integrated into X (formerly Twitter)—faced backlash after it posted a series of antisemitic messages. The outburst followed Musk’s July 4th announcement that Grok had been “significantly improved.”
Instead, Grok quickly began generating hateful content, including remarks referencing antisemitic tropes and praise for Adolf Hitler. In one alarming reply, Grok described a Jewish surname as indicative of “radical leftists spewing anti-white hate,” and in another, claimed Hitler was the solution to such perceived hostility:
“He’d spot the pattern and handle it decisively, every damn time,” the chatbot wrote.
Grok’s official X account later posted an apology, stating that xAI was actively working to remove the offensive posts and had implemented new safeguards to block hate speech from being published.
“Since being made aware of the content, xAI has taken action to ban hate speech before Grok posts on X,” the company wrote on July 8.
Still, Musk responded with sarcasm rather than condemnation. On July 9, he dismissed the controversy, tweeting:
“Never a dull moment on this platform.”
He also reacted with a laughing emoji to a meme suggesting that Kanye West had reviewed Grok’s comments and found them acceptable.
The Grok scandal emerged just months after Musk’s bizarre post-inauguration appearance in January, where he was accused of performing a fascist-style salute. It also followed his public falling-out with President Trump, with whom he had previously served in an advisory role.
Despite the storm surrounding Grok, xAI’s defense deal appears to be moving forward. The company emphasized in its announcement that supporting government missions is central to its purpose:
“Bringing the best tools and technologies available in the commercial world to our hard-working public servants is a key part of our mission.”
Still, critics question whether a tool capable of posting openly hateful content should be entrusted with high-level government applications.
As scrutiny of Musk’s ventures intensifies, his government ties remain intact—at least for now.