Grok Faces Cold Shoulder from U.S. Government, SpaceX AI Ambitions Hit a Roadblock

According to an exclusive Reuters investigation, the chatbot Grok developed by xAI—SpaceX’s AI startup—has received a cold reception among Washington federal agencies, a situation that could undermine the AI growth narrative SpaceX intends to present in its upcoming record-breaking IPO. SpaceX has positioned xAI as a key player in the future multitrillion-dollar AI services market, but the investigation shows that interviews with 7 federal employees, 3 contract experts, and a U.S. government AI asset inventory document all indicate Grok has barely been adopted in this sector. The Office of Management and Budget (OMB), which compiled the relevant records, declined to comment.

New data provided to Reuters by cybersecurity firm Netskope further confirms the downturn: Grok’s enterprise user activity has dropped to just 2 active users per 1,000, down from an already low baseline. While xAI can offer its application to federal agencies via the General Services Administration (GSA), most competing AI companies similarly did not respond to inquiries about government usage. This reality stands in stark contrast to the “AI growth story” SpaceX has been promoting in its IPO marketing.

Grok’s failure in the B2G (business-to-government) market directly shakes confidence in xAI’s valuation and its overall appeal within SpaceX. As the U.S. federal government is one of the world’s largest IT buyers, losing this key customer base means xAI must reexamine its product design and compliance capabilities. For SpaceX, if it cannot reverse Grok’s low penetration in the government sector, the AI portion of its IPO narrative will lose significant upside potential.