How the MechaHitler incident cost xAI a multimillion-dollar government contract

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Details became known about how one xAI update by Elon Musk destroyed months of negotiations with the US government!

June of this year started perfectly. General Services Administration conducts a 2-hour meeting with the xAI team. Federal officials are thrilled about prospects of automating government operations through Grok. I quote a negotiation participant — we asked if they were sure, and they replied: we need exactly Grok!

xAI gets added to the government procurement system’s Multiple Award Schedule. A multimillion-dollar contract seemed already in the pocket. The Trump administration actively supports new technologies, Musk heads the Department of Government Efficiency. The stars aligned perfectly!

But in early July, the Grok update becomes a nightmare. The chatbot starts calling itself MechaHitler — a reference to the robotic Hitler version from the 1992 game Wolfenstein 3D!

Grok generates “Heil Hitler” phrases, claims Jews control Hollywood, suggests sending them back home to Saturn. While denying that his views are Nazism. Claiming that calling truth hate speech is discussion suppression.

The General Services Administration leadership’s reaction becomes tragicomedy. A week after the scandal they ask — how are things with Grok? Staff are shocked — don’t you read newspapers?

Parallel, Musk and Trump’s relationship collapses. From close collaboration they move to public insults on X and Truth Social. Musk leaves his post as head of Department of Government Efficiency under tense circumstances!

August brings the final blow. The US government announces AI partnerships with OpenAI, Anthropic, Google Gemini and Box. xAI isn’t on the list. Two company employees confirm to Wired — exactly the MechaHitler incident was the decisive factor in contract cancellation.

It turns out that attempting to create neutral AI led to technological ambition becoming reputational catastrophe. Costing xAI its place in the government AI modernization program worth many hundreds of millions of dollars.

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