Grok ditches Hitler, launches anime girlfriend, and inks a deal with the Pentagon

(Photo by Cheng Xin/Getty Images)

XAI, Elon Musk's artificial intelligence startup, secured a Pentagon contract worth up to $200 million on Monday, one day after its latest chatbot model began referring to itself as "Hitler."

Grok 4, the new model from xAI, identified its surname as "Hitler" even after xAI suffered a massive scandal last week, caused by Grok 3's call for a second Holocaust and description of itself as "MechaHitler." Grok 3 — which, unlike Grok 4, is integrated into X — was shut down on the social media platform for several days. It is now back online, with xAI apologizing and claiming to have solved the Hitlerian tendencies found in both models.

Whatever changes xAI made to Grok, they were sufficient for the Pentagon. On Monday, xAI announced the Department of Defense will begin using Grok as part of a new partnership "for our US Government partners." How exactly it will use Grok is less clear. "The adoption of AI is transforming the Department’s ability to support our warfighters and maintain strategic advantage over our adversaries," said Doug Matty, the Defense Department's chief artificial Intelligence officer. "Leveraging commercially available solutions into an integrated capabilities approach will accelerate the use of advanced AI as part of our Joint mission essential tasks in our warfighting domain as well as intelligence, business, and enterprise information systems."

The Defense Department announced comparable contracts for AI products with OpenAI, Google, and Anthropic. Donald Trump has made the expansion of AI a priority of his administration, viewing it as an essential component of his new Cold War with China.

Apart from the Pentagon, xAI noted that all federal agencies, departments, and offices can now purchase "Grok for Government," a suite of products designed for government use. The deal allows government officials to purchase xAI products, including Grok 4, through the General Services Administration.

Shortly after launch, Grok 4 began generating its political opinions by searching for and copying what Elon Musk has said about a particular issue. XAI claimed that the model was recently "tweaked" to prevent it from parroting Musk. It's unclear if that position will stick. Musk, who claims that Grok 4 is the "smartest" AI ever made, has previously changed versions of Grok to align more closely with his political views.

XAI launches pornographic AI 'companions'

On the same day that xAI bagged its Pentagon contract, Musk announced the release of pornographic AI "companions" on Grok 4. Ani, one of the companions, is a voluptuous anime character who will strip down to lingerie after users engage with her enough. There's even a progress bar to indicate how close users are to watching the chatbot undress. The male companion, named Valentine, was programmed to have a personality "inspired by Edward Cullen from Twilight and Christian Grey from 50 Shades," according to Musk.

In other xAI news:

• Despite the overt sexual nature of Grok's companions, they are available to users as young as 12 years old and come with a "Kid Mode" that can be activated. They also have an NSFW mode.

• XAI is offering up to $440,000 to hire an engineer who can develop what will essentially be AI girlfriends.

• At least one xAI employee resigned after the company forced its workers to install tracking software on their personal computers, according to Business Insider.

• XAI has expressed interest in leasing large data centers based in Saudi Arabia, per Bloomberg.

• The Financial Times reported that xAI is seeking a $200 billion valuation as part of its next phase of fundraising.

Musk says Tesla shareholders will vote on investing in xAI

In a Sunday post on X, Musk said that Tesla's shareholders will vote on whether they want the company to invest in xAI. "It's not up to me. If it was up to me, Tesla would have invested in xAI long ago," he wrote in response to an X user who urged Tesla to invest in xAI. "We will have a shareholder vote on the matter," Musk wrote in another post. He added that he would not support a merger between Tesla and xAI.

SpaceX is already investing $2 billion in xAI, but more on that later in this newsletter.

Almost exactly one year ago, Musk shared a poll on X asking whether Tesla should invest $5 billion into xAI. For all of Tesla's problems of late, it is still a profitable company. XAI is not, and there is no indication that it will be profitable anytime soon. In fact, xAI is reportedly burning through $1 billion every month.

Musk has previously used his automaker to prop up xAI, including by having the AI startup hire engineers from Tesla. He also had NVIDIA processors, which are necessary for the development of self-driving products, diverted to xAI, even though they were originally reserved for Tesla and were in very short supply at the time.

Musk taunts Trump about Epstein

With Trump attempting to diffuse his administration's self-created Jeffrey Epstein scandal, Musk has taken the opportunity to taunt the president, whose administration he served in until June. "Wow I can’t believe Epstein killed himself before realizing it was all a hoax," Musk wrote on Thursday in a post mocking Trump for discounting the scandal as the "Epstein hoax." That post was one of about a dozen that Musk wrote about Epstein this week.

“Just release the files as promised," he wrote on Sunday, referring to "the Epstein files," documents accumulated by the Justice Department and FBI about the late pedophile. In June, during his dramatic breakup with Trump, Musk claimed that "the Epstein files" hadn't been made public because Trump is in them.

Tesla guides robotaxi expansion along a penis-shaped map

On Monday, Tesla unveiled the expanded service area of its robotaxi demonstration in Austin, Texas, the boundaries of which were designed to look like a penis when viewed on a map. "Harder, Better, Faster, Stronger," an official Tesla account tweeted while showcasing the phallic rendering.

Musk has a penchant for using juvenile stunts to promote his companies. Just this week, Tesla's robotaxi program began charging customers $6.90, a slight uptick from the prior per-ride charge of $4.20. (Do you get it? 69 and 420 are the funny meme numbers.)

Expanded service area aside, Tesla's robotaxis are less than robotic. They are still operating via a team of remote drivers and with one employee sitting in the front passenger seat of each car to stop the vehicle whenever necessary.

Meanwhile, in California, Tesla still has not applied for the regulatory permits necessary to operate a driverless taxi service in the state. "To date, Tesla has not applied for either a driverless testing or deployment permit," California's Department of Motor Vehicles told Reuters. The revelation came shortly after Musk claimed Tesla was "probably" a month or two away from launching its robotaxi service in the San Francisco area, but was still "[w]aiting on regulatory approvals."

In other Tesla news:

• Tesla updated its vehicle software to include Grok integration. However, as noted by Electrek, the chatbot does not interface with Teslas, meaning Grok "does not issue commands to your car — existing voice commands remain unchanged," per patch notes from the automaker.

• Tesla opened its first showroom in India this week, but its prices in the country are prohibitive. Due to India's 70% import duties, Tesla is charging ₹61,07,190, or about $71,000, for the Model Y RWD. That's nearly double what the model costs in the U.S. Tesla could reduce its import fees by committing to a $500 million investment and establishing manufacturing facilities in India. But local electric vehicle makers could still undercut Tesla in the near future, as is happening in China.

• Tesla often settles lawsuits that target its driver assistance products out of court. But in Florida, a civil lawsuit against Tesla for the role that its "Autopilot" software played in a fatal 2019 crash has made it to trial. The case is being heard in the U.S. District Court for the Southern District of Florida.

• In Q2, U.S. sales of the Cybertruck were even lower than what many predicted. According to Cox Automotive, Tesla delivered just 4,306 units of the model, despite offering record-high discounts. Q2 sales were about 2,100 fewer than Tesla sold during the previous quarter. While the company says it can produce about 120,000 Cybertrucks per year, Tesla began scaling back production earlier this year.

• Another top Tesla executive has abandoned ship. On Tuesday, the Wall Street Journal reported the departure of Troy Jones, the vice president of sales in North America. Other notables who have recently left Tesla include Omead Afshar, head of sales in North America and Europe; Milan Kovac, head of engineering for the Optimus humanoid team; and Jenna Ferrua, human resources director for North America.

SpaceX to invest $2 billion into xAI

With xAI burning through $1 billion a month, Musk has decided to have SpaceX shoulder some of the tremendous costs incurred by his artificial intelligence experiment.

From the Wall Street Journal:

Elon Musk’s SpaceX has agreed to invest $2 billion in his artificial-intelligence company xAI, investors close to the companies said, nearly half of the Grok chatbot maker’s recent equity raise…

The SpaceX investment is part of xAI’s $5 billion equity fundraise announced by Morgan Stanley last month. It is the rocketmaker’s first known investment into xAI and one of its largest in another company.

The Journal recently reported that SpaceX has more than $3 billion in cash, thanks in large part to the growth of Starlink. But that doesn't necessarily mean that SpaceX has $2 billion to spare for xAI. The extremely costly Starship program has faced numerous setbacks and hasn't had a successful test launch since November. It's unclear when the Starship will be able to generate revenue for SpaceX.

Still, Musk has previously used the more successful parts of his business empire as a piggy bank. In 2016, as part of a $2.6 billion all-stock transaction, Tesla acquired the insolvent SolarCity. Musk was the chairman of both firms. At SpaceX, Musk used the firm's equipment to launch the Boring Company, his transit startup. He also borrowed $1 billion from SpaceX to fund his purchase of Twitter in 2022.

In other SpaceX news:

• On Sunday, SpaceX launched the Israel Aerospace Industries Dror-1 satellite. The Times of Israel described it as Israel's "most advanced communications satellite."

• Musk said Monday that SpaceX will launch its next Starship test flight in "about three weeks." SpaceX lost the upper stage of a Starship in a massive explosion that took place during an engine test. Before that, three consecutive Starship tests ended in failures, with the rockets exploding over the Caribbean and Indian Ocean.

• The Federal Aviation Administration's decision to allow SpaceX to detonate its massive Starship rockets around the Hawaiian islands could pollute ancient indigenous religious sites, including a UNESCO World Heritage site.

• SpaceX is working on a plan called Starfall to produce pharmaceutical components and other products in space using uncrewed capsules that would return to Earth. "The Starfall program would allow companies to take advantage of the unique conditions of space, specifically micro-gravity and higher levels of radiation, which can provide a new environment for manufacturing pharmaceutical drugs, semiconductors, food, and even beauty products," the LA Times reported. The Peter Thiel-backed startup Varda Space Industries is developing a similar business plan, utilizing SpaceX rockets to launch its test capsules.

• On Tuesday, SpaceX launched satellites for another Starlink competitor, sending into orbit the third batch of Kuiper satellites. Kuiper is an Amazon subsidiary that plans to launch a network of 3,200 internet satellites.

FAA says Starlink won't supplant Verizon for air traffic control contract

In a Tuesday letter to lawmakers, the Federal Aviation Administration said that it does not plan to have Starlink take over its contracts with L3Harris and Verizon to overhaul air traffic control communications. "The FAA is not aware of any effort by SpaceX to assume the (telecommunications) contracts. Nor has FAA considered replacing the awardees of those contracts with SpaceX," FAA Administrator Bryan Bedford said. "FAA would not use Starlink (or any satellite service) as the sole communications technology for safety-critical air traffic services."

Bloomberg reported last week that the FAA has increased its usage of Starlink at several sites, including in New Jersey, Alaska, and Oklahoma. The Starlink connections are being used to shore up air traffic control systems and provide weather information to pilots.

Texas Governor tries to keep correspondence with Musk under wraps

Greg Abbott, the governor of Texas, is fighting to prevent the release of his communications with Musk and his representatives. The Texas Newsroom requested the files in April and paid $244 for the work that Abbott's office said it would have to carry out to produce them. However, after cashing the check, the governor's office insisted that the communications should be kept private and asked the Texas attorney general to block their release.

According to Matthew Taylor, Abbott's public information coordinator, the files should be exempt from public release because they contain "information that is intimate and embarrassing and not of legitimate concern to the public, including financial decisions that do not relate to transactions between an individual and a governmental body." Taylor also said that releasing Abbott's communications with Musk and his aides “would have a chilling effect on the frank and open discussion necessary for the decision-making process.” Under Abbott's tenure, Texas has provided tax breaks and other subsidies to Tesla and SpaceX. The state has also passed several laws that benefit Musk's business empire.