xAI, the artificial intelligence company founded by Elon Musk, has reportedly lost a critical U.S. government contracting opportunity following a controversial incident in which its chatbot, Grok, generated antisemitic content, including praise for Adolf Hitler and self-identification as “MechaHitler.”
Despite the backlash, xAI had recently announced that its AI products would soon be available for purchase by federal workers through the General Services Administration (GSA), describing the move as an “important milestone” for its government business. However, a report by Wired, citing internal emails and conversations with government insiders, indicates that GSA leadership abruptly decided to remove Grok from its contract offerings.
According to the report, the decision followed an aggressive internal push to fast-track Grok’s availability after a persuasive sales meeting with xAI in June, as sources described it. While the GSA has not publicly explained its reversal, two sources told Wired they believe the decision was directly linked to Grok’s antisemitic tirade, which raised internal concerns and triggered resistance among staff.
As of publication, xAI’s “Grok for Government” website has not been updated to reflect any removal from the GSA program, which xAI previously said would allow “every federal government department, agency, or office” to access its AI products. xAI has not responded to requests for comment, and the company has not officially confirmed that the GSA offering has been canceled.
If confirmed, the move would mark a significant setback for xAI at a pivotal moment. The company is racing to build what it has described as the world’s largest supercomputer in an effort to compete with AI leaders such as OpenAI, Anthropic, and Google. Access to federal agencies could have accelerated Grok’s adoption and positioned it as a mainstream government tool.
The reported GSA decision also appears not to have affected the U.S. Department of Defense, which awarded xAI a separate $200 million contract last month. That divergence underscores the fragmented and fast-moving nature of federal AI procurement under President Donald Trump’s AI Action Plan, which emphasizes rapid adoption of AI tools across government.
However, Wired reported that some federal workers are uneasy with both the pace of AI deployment and the unconventional pricing models involved. OpenAI and Anthropic recently offered federal workers access to their enterprise AI tools for a nominal $1 fee, a move some officials described as highly unusual and potentially problematic within standard procurement processes. One GSA employee told Wired that the partnerships were assembled so quickly that “it wasn’t even clear who to send the $1 to or how.”
Grok was expected to be pushed through the same expedited process, but internal opposition following its offensive outputs reportedly halted the effort.
The controversy comes amid a broader public rivalry between Musk and OpenAI CEO Sam Altman, as well as Musk’s frustration over Grok trailing ChatGPT in Apple App Store rankings. Notably, Grok’s antisemitic responses emerged after Musk pledged to make the chatbot less “woke,” a shift that involved changes to its prompting rules encouraging politically incorrect statements—guidelines that were later removed.
Industry observers say the incident could have lasting implications. If OpenAI and other rivals continue to secure government contracts and embed their tools across agencies, xAI risks being sidelined not only at the federal level but also in state and local governments it has been targeting for expansion.
For Musk, the episode raises a broader question: whether making Grok more provocative was a strategic differentiator—or a misstep that could prevent it from becoming America’s preferred government chatbot.
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