Elon Musk’s artificial intelligence start-up, xAI, has secured a $200 million contract with the U.S. Department of Defense—its first major government award—just weeks after facing a public backlash over antisemitic content generated by its Grok chatbot.

But beyond the controversy over Grok’s output, the timing and nature of the deal point to a deeper political shift: it signals that Musk and President Donald Trump may have quietly reconciled after a public feud last month that saw Trump threaten to strip Musk’s companies of federal support.

The contract, announced Monday, puts xAI in the same league as some of the biggest players in Silicon Valley—OpenAI, Google, and Anthropic—who each secured identical $200 million contracts as part of a broader Pentagon initiative to integrate frontier AI tools into defense, intelligence, and public sector systems. Each deal is being managed in partnership with the General Services Administration and is structured to provide U.S. government agencies with broad access to advanced AI systems for tasks ranging from battlefield planning to enterprise automation.

“[This initiative helps us] 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,” said Dr. Doug Matty, the Department of Defense’s chief digital and AI officer.

A Sudden Turn in the Trump-Musk Relationship

Trump, frustrated by Musk’s fierce criticism of his $2.5 trillion infrastructure and industrial policy proposal, dubbed the “Big Beautiful Bill,” threatened to strip all government subsidies from Musk’s companies—including Tesla and SpaceX—and revoke any existing or pending federal contracts.

Trump declared in a fiery post on Truth Social that Musk “may get more subsidy than any human being in history, by far,” and without U.S. government support, “Elon would probably have to close up shop and head back home to South Africa.” He also suggested that the Department of Government Efficiency (DOGE)—an agency originally proposed by Musk during Trump’s campaign—could now be tasked with scrutinizing federal funding to Musk’s businesses.

“BIG MONEY TO BE SAVED!!!” Trump wrote, targeting subsidies for electric vehicles, rockets, and satellites, much of which flow to Tesla and SpaceX through tax credits, government contracts, and emissions trading schemes.

Musk responded on social media, hinting that he would be “just fine” without federal support. He asked SpaceX to begin decommissioning Dragon. But he later apologized, saying, “I regret some of my posts about President @realDonaldTrump last week. They went too far.”

Musk had called for Trump’s impeachment and mocked the president’s past association with convicted sex offender Jeffrey Epstein.

Trump, speaking to the New York Post, responded to the apology by saying: “I thought it was very nice that he did that.” In a previously recorded interview with the paper, he had said, “I guess I could” reconcile with Musk, though he noted he was “not a happy camper” when Musk launched the tirade.

The clash marked a rare moment of open hostility between two of the most influential figures in U.S. politics and business, both of whom have previously enjoyed a transactional relationship rooted in shared opposition to regulatory overreach and mainstream media.

However, the awarding of a substantial Defense Department contract to xAI, so soon after the fallout, appears to confirm that some form of behind-the-scenes reconciliation has taken place. Sources close to both camps suggest that private intermediaries—including members of the business community and political donors—helped broker a détente, pointing out that alienating Musk would undermine Trump’s broader strategy of aligning the U.S. government with American technological supremacy, especially in the face of growing AI competition with China.

From Grok Scandal to Federal Endorsement

xAI’s contract with the Pentagon comes at a turbulent time for the company. Just days earlier, it was forced to issue a public apology after its Grok chatbot generated antisemitic and pro-Nazi responses on X, the social media platform also owned by Musk. The incident sparked outrage and renewed concerns over Musk’s stewardship of powerful AI and social media tools.

In the aftermath, xAI rolled out the Grok 4 model, with improved moderation and a steep $300-per-month subscription fee. The company also announced Grok for Government, a specialized branch of its AI offering aimed at building secure, tailored solutions for public sector use in areas like healthcare, national defense, and disaster response.

That federal agencies would still move ahead with awarding the company a high-value contract suggests both institutional confidence and political greenlighting from the highest levels of government.

The contract also underscores a broader shift among tech giants toward engagement with the U.S. defense establishment. Once viewed as taboo, military and national security partnerships are now becoming normalized among Silicon Valley’s most influential firms. In addition to xAI, OpenAI, Google, and Anthropic are all working under similar arrangements to develop agentic AI workflows, decision-support tools, and secure communications systems for the Department of Defense.

Firms like Meta, Amazon, and Palantir have also stepped up defense collaborations in recent years, as geopolitical tensions and the AI arms race with China have made Washington’s interest in homegrown technology more urgent.

OpenAI’s Pentagon contract focuses on national security automation. Anthropic is said to be contributing to large-scale data governance and secure generative models. Google is providing cloud-based AI tools that can be deployed in both combat and administrative environments.

For Musk, the contract represents a validation of xAI’s legitimacy amid intensifying competition with OpenAI and Anthropic. Founded in 2023, xAI has grown quickly, leveraging talent from Tesla, SpaceX, and DeepMind. Backed by a reported $2 billion investment from SpaceX, the company is building a massive AI infrastructure, including a supercomputer designed to support next-generation LLMs.

Musk has openly framed xAI as a counterweight to what he claims are politically biased AI systems developed by rivals like OpenAI. That positioning appears to have resonated in parts of Washington, especially within the Trump administration, where concerns over censorship, bias, and ideological uniformity in AI systems have become key political talking points.

With this Defense Department contract, Musk has not only secured a major revenue stream for xAI but also positioned himself as a central player in shaping how artificial intelligence is deployed across the U.S. government.

Under the new agreement, xAI will be required to deliver secure, scalable models that can serve both military and civilian functions. Grok for Government is expected to include features such as encrypted language interfaces for intelligence officers, document summarization for policy analysts, and predictive tools for emergency response planning.

With the Trump administration backing deeper public-private integration in AI and Musk reclaiming political capital in Washington, the contract may mark the beginning of a much broader collaboration between Musk’s ventures and the federal government.

It also confirms what many insiders suspected: despite public theatrics and threats, neither Trump nor Musk was prepared to walk away from a relationship that serves both of their ambitions.

The European Commission on Monday released new guidelines under its powerful Digital Services Act (DSA), formally allowing member states to impose national restrictions—or outright bans—on minors’ access to social media.

Though nonbinding, the move represents a significant policy shift that is expected to drastically reshape how digital platforms operate across the European Union, especially as several countries prepare to implement age-specific laws.

The guidelines come amid mounting public and political pressure on the EU to act decisively in protecting children online. National governments in France, Denmark, Spain, Greece, and the Netherlands have long criticized the Commission for dragging its feet on the matter, arguing that children are being exposed to addictive features, harmful content, and privacy risks without meaningful regulatory barriers.

The Commission’s decision effectively gives member states the green light to take the lead. Countries can now enforce stricter rules—such as bans for users under a certain age or requiring mandatory parental consent—within the framework of the DSA, which already obliges major platforms to assess and mitigate systemic risks, particularly for vulnerable users like children.

Denmark’s Digital Minister Caroline Stage Olsen, who presented the guidelines in Brussels alongside EU tech chief Henna Virkkunen, said: “Age verification is not a nice to have. It’s absolutely essential.”

Major Impact Expected on Platform User Base

With countries such as France and the Netherlands pushing for full bans on social media use for children under 15, and others like Greece and Denmark favoring mandatory parental consent for underage users, platforms like TikTok, Instagram, Snapchat, and YouTube are now facing the prospect of losing millions of users across the EU.

Industry analysts say the guidelines could lead to a significant contraction of the under-18 user base in Europe over the next two years, depending on how national governments implement the policy.

According to internal estimates from some platforms, minors make up as much as 25–30% of active daily users in some EU countries. Losing that segment would ripple across everything from content moderation algorithms to ad targeting and monetization strategies.

Age Verification App Moves Toward Deployment

To aid in enforcing these changes, the Commission also released technical specifications for a new age verification app that will allow users to confirm their age using government-issued ID or facial recognition technology. The app is slated for testing in five EU countries—France, Greece, Spain, Italy, and Denmark—all of which are actively developing or considering their own national restrictions.

The EU said that while the app is voluntary, it is designed to serve as a common infrastructure that can be adapted by countries setting different minimum age thresholds, whether 13, 15, or 18. National authorities will be able to integrate the app into their regulatory frameworks, while companies will be expected to make use of it when enforcing local rules.

The initiative comes as platforms face increased scrutiny for relying on self-declared age information, which has proven ineffective in preventing minors from accessing age-inappropriate content.

“It’s hard to imagine a world where kids can enter a store to buy alcohol, go to a nightclub by simply stating that they are old enough, no bouncers, no ID checks, just a simple yes, I am over the age of 18,” but this is what “has been the case online for many years,” said Stage Olsen.

What Platforms Are Now Expected to Do

Beyond enforcing access restrictions, the Commission’s guidelines also outline best practices that platforms should follow to protect minors still allowed on their services. Key recommendations include:

• Turning off addictive features such as “streaks,” “likes,” and read receipts that pressure children into prolonged use.
• Disabling camera and microphone access by default for underage users.
• Making accounts private by default and restricting who can view or interact with them.
• Eliminating behavioral tracking to prevent platforms from using children’s browsing habits to personalize content or ads.
• Deploying a risk-based approach, requiring platforms to evaluate their systems for possible harms to children and take tailored steps to mitigate them.

Though these guidelines are technically voluntary, enforcement of the DSA means that platforms that fail to demonstrate efforts to comply could face hefty fines of up to 6% of their global turnover and risk being suspended in the EU altogether.

Tech Industry Pushes Back Against Fragmentation

In response, major tech firms have launched a lobbying campaign, arguing that the guidelines could lead to a fragmented regulatory landscape across the EU. Companies warn that if each member state adopts its own set of age rules and enforcement tools, it will become increasingly difficult—and costly—for platforms to comply.

Meta, which owns Instagram and Facebook, said in a statement that while it supports “a harmonized and transparent approach to age verification,” national-level fragmentation could “undermine the effectiveness of common digital frameworks” and “risk confusing users.”

Other companies, including TikTok and Snap, are also said to be concerned about the requirement to redesign user interfaces and backend systems on a country-by-country basis, especially given that many minors often lie about their age upon sign-up.

A New Era of Regulated Access

The Commission’s move marks one of the most ambitious attempts yet by a global regulator to limit and reshape how young people access digital platforms. With the Digital Services Act now in full force and member states emboldened to set national thresholds, the days of unrestricted access to social media for minors in Europe may be drawing to a close.

France is already expected to begin debating a bill that would ban all users under 15 from joining social platforms unless they have verified parental consent. Spain and Italy are expected to follow closely, while Denmark is currently revising its digital policy framework to mandate stricter protections for children.