"Please Use Our Model for $1"… AI Companies Courting the US Government

Korea Economic Daily

Summary

Leading US AI companies have announced they will supply AI models to public agencies for $1 per year to dominate the public sector market.
This ultra-low pricing strategy is seen as a move to secure massive amounts of government data and to aim for future mid- to long-term profitability.
Industry evaluations note that it is a strategy for a few companies to dominate the market and secure standards.

American artificial intelligence (AI) companies have started offering their AI models to the government for $1. It is analyzed that, rather than seeking short-term profits, the intent is to dominate the public sector market for mid- to long-term gains and, furthermore, to secure massive government data.

Anthropic announced on its website on the 12th (local time) that it would offer enterprise and government versions of Claude to the executive, legislative, and judicial branches of the US government for $1 per year, in order to eliminate barriers to governmental AI adoption. Following a similar proposal by OpenAI a week earlier, this has triggered a '$1 competition.'

Anthropic’s main selling point is its ‘multi-cloud’ approach. Anthropic emphasized that its AI is provided through the clouds of Amazon Web Services (AWS), Google, and Palantir, each of which meets government regulatory requirements. This contrasts with OpenAI’s government-focused product, which is only available through Microsoft Azure, and is positioned as an advantage since risk is distributed. The General Services Administration (GSA) of the US accepted both Anthropic’s and OpenAI’s $1 proposals.

AI companies are competing to introduce government-focused AI products in order to supply their models to the government. On June 6, Anthropic launched its government version of Claude, followed by OpenAI (June 16) and xAI (July 14) entering the competition. The tech industry analyzes that this is the start of a competition to replace laid-off government workers with AI, initiated as Elon Musk, CEO of Tesla, moves for large-scale layoffs via the Department of Government Efficiency (DOGE).

This aggressive low-pricing strategy is seen as a monetization tactic that leverages the characteristic of AI models that are not easily switched once adopted. Alex Palowski, an analyst at StrategyStack, commented, “It’s a move to establish a dominant position and set de facto standards in a market controlled by only a few players.” CNBC analyzed, “It’s an attempt to increase the government’s AI dependence and cultivate a favorable attitude toward AI among legislators and judges before regulations are finalized.”

Silicon Valley = Inyeop Kim, Correspondent inside@hankyung.com

WLD