xAI has reached an agreement with the U.S. General Services Administration (GSA) to supply its chatbot Grok to federal agencies for 42 cents over an 18-month period, drastically reducing the cost compared to competitors such as OpenAI and Anthropic who charge $1. This pricing strategy is considered highly unconventional and has raised speculation about its purpose. The deal includes access to xAI engineers to help integrate the technology, potentially enhancing its efficiency and applicability within the federal government’s operations. TechCrunch reports that this pricing model may be linked to Elon Musk’s personal interests, including his humor and references to the number 42, which is highlighted in ‘The Hitchhiker’s Guide to the Galaxy’ as the answer to the meaning of life and the universe.
According to internal emails obtained by Wired, the White House directed the GSA to include xAI’s Grok on the approved vendor list as soon as possible. This move positions xAI as one of several AI firms, including Anthropic, Google, and OpenAI, vying for a $200 million Pentagon contract. A GSA spokesperson clarified that Musk was not directly involved in the negotiations, indicating that the deal was executed through the company’s standard business processes. The significance of xAI’s pricing strategy for Grok remains under scrutiny, as it could set a new precedent for AI technology procurement in the federal sector, potentially influencing future contracts and industry standards.