Grok Snubbed by U.S. Government, Clouds SpaceX’s AI Growth Story

According to an exclusive report by Reuters, Elon Musk’s xAI chatbot Grok has faced a significant setback in the U.S. federal government, the world’s largest potential customer. Citing feedback from seven federal employees and three contract specialists, along with AI inventory records from the Office of Management and Budget (OMB), the report shows that Grok has achieved extremely low adoption rates in government agencies, with virtually no meaningful deployment. OMB did not respond to a request for comment, and xAI did not reply to Reuters regarding details of Grok’s use in government.

This failure directly undermines the AI growth story that SpaceX has touted in its IPO plans. SpaceX previously claimed that it would enter the so-called “multi-trillion-dollar” AI services market through xAI, positioning it as a core selling point for the IPO. However, data shows that Grok is losing ground not only among enterprise users—according to the latest data from Netskope, Grok’s enterprise usage has dropped to just 2 users per 1,000—but its consumer performance is equally poor: downloads plummeted from over 20 million in January 2026 to roughly 8.3 million in April, with paid subscriber rates hovering at just 0.17%, far below ChatGPT’s concurrent paid rate of over 6%.

Notably, the U.S. government has opened procurement channels to multiple AI companies through the General Services Administration (GSA), but Grok has failed to secure government contracts like its competitors Anthropic and OpenAI. Meanwhile, to meet its own AI computing needs, SpaceX has even begun leasing capacity from rival Anthropic, hinting at potential capacity bottlenecks within xAI.

Outlook: Grok’s failure in the government market may force SpaceX to reassess the weight of its AI business in its IPO valuation. Without gaining traction with key large clients like the U.S. government, xAI’s “growth story” will struggle to support its value proposition as an independent ecosystem. Going forward, attention should focus on whether xAI can launch a customized version that meets government compliance requirements, and whether Musk’s other ventures (such as Tesla and Neuralink) can bring synergies to Grok.