Elon Musk’s artificial intelligence startup xAI has secured a major breakthrough in its efforts to compete in the government technology space, with the US General Services Administration (GSA) announcing a fresh agreement that will make xAI’s chatbot Grok available to federal agencies at a record-low cost. According to details confirmed by Bloomberg, federal departments can now purchase Grok AI models for just $0.42 per organisation, under an agreement effective from Thursday until March 2027. The GSA, which oversees procurement for the federal government, emphasised that this rate is considerably lower than the $1 per year per agency currently being charged by rival OpenAI for access to its ChatGPT platform.
The announcement is part of President Donald Trump’s AI Action Plan, an initiative designed to encourage wider adoption of artificial intelligence across government systems while simultaneously boosting innovation and development within the US. By ensuring that agencies can acquire advanced AI tools at standardised, low-cost rates, the administration hopes to accelerate digital transformation within the federal ecosystem.
The deal falls under the OneGov Strategy, an approach launched by the GSA in April to streamline how agencies purchase technology. The strategy is aimed at reducing fragmentation in contracts, standardising prices, and ensuring that agencies avoid entering into redundant or overlapping agreements with vendors. Through this framework, xAI’s agreement has been described as both the lowest-cost and longest-running AI deal signed under the OneGov programme so far.
As part of the agreement, xAI will not just provide access to Grok but also deploy its engineers to assist agencies with integration and deployment, ensuring that the chatbot can be effectively embedded into existing government workflows. Federal Acquisition Service Commissioner Josh Gruenbaum underscored the significance of this move, stating that widespread adoption of advanced AI models was critical to building an efficient and transparent government that taxpayers could trust. He further added that xAI’s willingness to dedicate engineering resources underlined its commitment to helping transform government operations.
The announcement, however, comes against the backdrop of intensifying legal and corporate rivalry between xAI and OpenAI. Earlier this year, xAI filed a lawsuit in California federal court accusing OpenAI of systematically stealing its trade secrets. The complaint alleges that OpenAI engaged in a “deeply troubling pattern” of recruiting former xAI employees specifically to gain access to proprietary knowledge of Grok’s source code, business strategies, and operational strengths, including its advanced data centre infrastructure. According to xAI, these practices amounted to inducing employees to breach confidentiality agreements and provided OpenAI with an unfair competitive edge in the race to dominate global AI markets.
With this new agreement, Musk’s company is positioning itself as a serious challenger to OpenAI, Meta, and Alphabet (Google’s parent company). The timing is also significant, as xAI recently secured over $10 billion in funding, raising its valuation to an impressive $200 billion. This combination of aggressive legal action, strategic government partnerships, and massive investor backing indicates that xAI is determined to carve out a dominant position in the global AI landscape.
