A new artificial intelligence chatbot from the company behind SpaceX is struggling to win over what could be one of its biggest potential customers – the federal government.
Records from federal agencies reveal that Grok, developed by the AI startup xAI, appears in just three instances out of more than 400 documented government artificial intelligence applications that identify specific technology vendors. Meanwhile, competing products dominate the landscape, with 234 applications using technology from OpenAI including ChatGPT, 33 utilizing products from Alphabet, and 26 employing Anthropic’s Claude system.
The disappointing performance comes as SpaceX prepares what it describes as the largest initial public offering in history, banking heavily on capturing a significant portion of what the company estimates as a multi-trillion-dollar artificial intelligence services market through xAI.
Federal inventory documents compiled by the Office of Management and Budget paint a picture of limited government interest in Grok, despite the chatbot being offered to agencies at deeply discounted rates of 42 cents per agency for eight months. This pricing strategy mirrors tactics used by technology companies to encourage initial adoption before transitioning to higher-cost contracts.
“The goal is to encourage adoption so that federal employees eventually can’t imagine doing their jobs without generative AI,” explained Valerie Wirtschafter, who researches AI adoption in the federal government at the Brookings Institution.
The lackluster government reception creates uncertainty around SpaceX’s projected $1.75 trillion IPO valuation. Company filings indicate expectations for substantially higher revenue from building AI solutions for large organizations – a market opportunity valued at $26.5 trillion – compared to other business segments.
Industry experts view the federal government’s lukewarm response as a warning sign for broader market acceptance. “It suggests the model lacks the security rigor required at the federal level, which will be a red flag” for corporate buyers, said Vineet Jain, co-founder and CEO of enterprise software company Egnyte. “Without government validation, the $1.75 trillion valuation looks less like a floor and more like a high ceiling.”
The chief executive of SpaceX has publicly championed Grok’s potential for federal applications and advocated for widespread government adoption. In September, announcing Grok’s arrangement with the General Services Administration, he expressed his team’s desire to collaborate with the current administration to “rapidly deploy AI throughout the government for the benefit of the country.”
His Department of Government Efficiency actively pushed Grok adoption, including directing Department of Homeland Security officials to use the system despite lacking proper approval for the agency’s operations.
Government usage data shows Grok being employed for basic functions at agencies like the Office of Personnel Management and Department of Health and Human Services, including document drafting and social media posting. An OPM spokesperson noted that Microsoft Copilot remains the agency’s most frequently used AI tool.
More advanced AI applications also show minimal Grok presence. Only three references appear in specialized deployment data, showing “limited test or pilot capacity” usage at the Energy Department’s Lawrence Livermore National Laboratory and the Election Assistance Commission. OpenAI and Microsoft combined account for 140 such applications.
While the Pentagon maintains a $200 million contract with xAI and has added Grok to its unclassified AI platform, internal preferences lean toward competitors. A Pentagon source with direct knowledge reported that many staff members favor alternative AI tools over Grok.
At the Defense Advanced Research Projects Agency, the Pentagon’s research division, different AI systems serve specific purposes: one company’s product handles engineering analysis while another manages coding and research tasks. The source indicated Grok sees limited use because it’s “just not the best model out there.”
xAI recently began pursuing enhanced government authorization through partnership with the Department of Agriculture, though three USDA information technology professionals reported no awareness of Grok usage within their organization. The department stated it was “proud to sponsor Grok” but didn’t address questions about actual utilization.
Recent setbacks include xAI losing a bid to develop a Grok-powered solution for the Department of Veterans Affairs, with sources indicating the chatbot failed to meet departmental requirements.
Corporate adoption mirrors the government struggles. Web traffic monitoring firm Netskope, which tracks AI usage among thousands of business customers, reported that Grok has “failed to gain significant traction” in corporate environments. Updated figures show enterprise usage declining to 2 out of every 1,000 users from a previous peak of 5 per 1,000 users.
Netskope executive Ray Canzanese noted that even active Grok users spend significantly less time with the chatbot compared to competitors – roughly half the engagement time of ChatGPT users. “The Grok usage data told him the chatbot “is just not going to enter the mainstream for corporate America,” he concluded.
