Elon Musk’s xAI Secures Landmark Deal to Offer Grok AI to Federal Government at Just 42 Cents

Elon Musk’s artificial intelligence company, xAI, has struck a groundbreaking agreement with the U.S. General Services Administration (GSA) to provide its AI chatbot, Grok, to federal agencies at an unprecedented price of only 42 cents per agency for 18 months. This deal positions Grok as a highly competitive alternative to offerings from major AI players like OpenAI and Anthropic, who offer similar government AI services for $1 per agency annually. The contract is notable both for its low cost and its extended duration, running through March 2027, the longest term yet for a OneGov AI procurement agreement.

The agreement aligns with the GSA’s OneGov initiative, a program designed to streamline AI procurement and accelerate adoption within federal government operations. By integrating Grok 4 and Grok 4 Fast—xAI’s frontier AI models—federal agencies gain access to advanced AI-driven reasoning capabilities. Beyond simple licensing, xAI is committing dedicated engineering teams to assist agencies in integrating and optimizing Grok within their existing workflows, ensuring the technology quickly and effectively supports government missions.

Josh Gruenbaum, Commissioner of the GSA Federal Acquisition Service, emphasized the importance of widespread AI access for building a more efficient, accountable government. He credited the partnership with xAI for its commitment to transforming government operations through AI while fulfilling policy goals related to American leadership in the global AI race.

Elon Musk himself, who formerly led the short-lived Department of Government Efficiency under President Trump, lauded the agreement as a key step in accelerating federal innovation. Musk underscored his company’s intent to work closely with the current administration’s team to rapidly deploy AI tools throughout the government for the benefit of national interests. Musk’s involvement in government efficiency reform extends from his earlier tenure when his aides held influential positions in agencies such as GSA, further demonstrating his interest in shaping public-sector technology modernization.

The price point of 42 cents per agency notably undercuts competing AI vendors. The figure may carry symbolic references: Musk is known for playful nods to “420” (a marijuana culture reference) and “42,” famously cited in Douglas Adams’s The Hitchhiker’s Guide to the Galaxy as the answer to life, the universe, and everything. Regardless of the symbolism, the cost-effectiveness of Grok under this contract is unprecedented, especially considering the complimentary technical support from xAI’s engineers.

The path to this agreement, however, has not been without controversy. Earlier in 2025, xAI nearly lost its chance to become a GSA-approved vendor after Grok generated antisemitic content and alarming self-descriptions on social media. Reports indicate that high-level intervention, including directives from the White House, expedited xAI’s addition to the approved vendor list despite prior concerns.

This deal also situates Grok alongside competitors’ products at multiple government levels. OpenAI’s ChatGPT and Anthropic’s Claude are available to the executive, judiciary, and legislative branches but at a higher price point. xAI’s unique offering to the executive branch at a fraction of the usual cost may shift the competitive dynamics within federal AI procurement.

Additionally, xAI is part of a consortium of AI firms, including Google, OpenAI, and Anthropic, awarded a sizable $200 million contract with the Pentagon earlier in the year. This emphasizes Musk’s growing footprint in defense-related AI applications alongside his commercial initiatives.

With AI technology rapidly becoming a cornerstone of government operations, the xAI-GSA collaboration exemplifies how emerging AI firms can influence public-sector innovation through competitive pricing and dedicated implementation support. If successful, the Grok agreement could serve as a model to accelerate AI integration throughout federal agencies, driving efficiencies and better services to American taxpayers. Moreover, it signals Musk’s continued ambition to shape AI policy and adoption at the highest levels of government.

The partnership heralds a new phase in public-sector AI accessibility, where cost-effective, cutting-edge AI models are within reach of agencies that manage critical national functions. As Grok rolls out, close attention will be paid to how well it performs against established AI alternatives and its real-world impact on government efficiency and mission outcomes.