The U.S. government struck a record low-cost deal with Elon Musk’s xAI to expand federal access to its Grok chatbot, underscoring Washington’s accelerating adoption of AI despite concerns over the bot’s reliability. (Source: Image by RR)

Longest-Term Deal Yet Signals Washington’s Deepening Commitment to AI

The U.S. government is deepening its embrace of artificial intelligence through a new deal with Elon Musk’s startup xAI. On Thursday, the General Services Administration (GSA) announced that federal agencies can now purchase Grok, xAI’s flagship chatbot, for just $0.42 per organization annually, effective through March 2027. The pricing, according to an article in finance.yahoo.com, undercuts rival OpenAI’s ChatGPT, which costs $1 per year for government access, and marks the most cost-effective deal yet under Washington’s AI-focused OneGov strategy.

Launched in April, OneGov seeks to modernize federal procurement by standardizing terms, cutting duplicate contracts, and accelerating the adoption of new technologies across agencies. Meta, OpenAI, Anthropic and Google have all signed similar agreements, but the Grok deal stands out both for its unusually low cost and its extended timeline. As part of the arrangement, xAI engineers will also support agencies directly, assisting with technical integration and training to help ensure smoother deployments of the chatbot.

Supporters argue that the agreement strengthens the government’s efficiency drive, aligning with President Donald Trump’s AI Action Plan, which emphasizes cutting red tape and embedding AI in core government functions. “Widespread access to advanced AI models is essential to building the efficient, accountable government that taxpayers deserve,” said Federal Acquisition Service Commissioner Josh Gruenbaum. He credited xAI’s willingness to commit resources, including dedicated engineers, as a factor that will help accelerate adoption across federal offices.

Still, the deal is not without controversy. Some Democratic lawmakers and advocacy groups have criticized the Trump administration’s eagerness to adopt Grok, pointing to the chatbot’s history of producing inaccurate or offensive outputs, including hate speech. They argue that widespread federal use of Grok risks spreading unreliable information in sensitive contexts. Those concerns highlight the high-stakes competition among major AI firms—xAI, OpenAI, Meta, and Alphabet—for influence in the federal market. Musk’s startup, now valued at $200 billion after raising more than $10 billion in new funding, is positioning itself as a central player in that contest. The GSA agreement—its longest-running and cheapest yet—cements Grok’s role in Washington’s fast-moving AI race, even as questions about trust and oversight remain unresolved.

read more at finance.yahoo.com