Anthropic to challenge Pentagon supply-chain risk designation in court

Anthropic PBC has vowed to challenge in court a Pentagon decision to designate the artificial intelligence company a risk to the US supply chain, escalating tensions between the firm and the Trump administration over safeguards governing the military use of AI technology.

The designation, communicated to the company on Wednesday, threatens Anthropic’s $200 million contract with the US Department of Defense and could limit the company’s ability to collaborate with defense contractors.

“We do not believe this action is legally sound, and we see no choice but to challenge it in court,” Chief Executive Officer Dario Amodei said in a blog post Thursday.

The move follows weeks of strained negotiations between Anthropic and US defense officials over how the company’s AI systems can be used by the military.

Pentagon designation escalates dispute

The conflict centers on Anthropic’s conditions for the use of its AI models, known as Claude.

The company sought assurances that its technology would not be used for domestic mass surveillance or fully autonomous weapons.

However, the Department of Defense wanted access to the models for any lawful military purpose.

“As we stated last Friday, we do not believe, and have never believed, that it is the role of Anthropic or any private company to be involved in operational decision-making—that is the role of the military,” Amodei wrote.

“Our only concerns have been our exceptions on fully autonomous weapons and mass domestic surveillance, which relate to high-level usage areas, and not operational decision-making.”

Defense Secretary Pete Hegseth had warned the company last week that it could be designated a supply-chain risk if negotiations failed.

The decision was formally communicated to Anthropic on Wednesday.

The label, which has historically been used against companies tied to foreign adversaries such as Chinese technology giant Huawei, requires defense contractors to certify that they do not use Anthropic’s technology in work connected to the Pentagon.

Anthropic is the first American company to receive such a designation.

Impact on contracts and defense projects

The designation places Anthropic’s existing government contracts at risk.

The company signed a $200 million agreement with the Pentagon in July and had become the first AI provider to deploy its models inside the US government’s classified networks.

Anthropic’s Claude tools have been used by defense personnel in mission workflows, including operations related to the conflict with Iran.

The Pentagon decision could also affect partnerships with other contractors.

Anthropic will have to halt work with Palantir Technologies on certain defense projects, including the use of Claude in Palantir’s Maven Smart System platform.

Still, Amodei said the legal authority used by the Pentagon is narrow enough that it should not affect business unrelated to specific defense contracts.

Microsoft, which announced plans in November to invest up to $5 billion in Anthropic, said it had reviewed the designation and concluded that it can continue working with the company on projects outside the Department of Defense.

Industry tensions and political fallout

The dispute has intensified competition among AI companies seeking government contracts.

Rival OpenAI announced its own agreement with the Pentagon hours after the US government signaled it would sever ties with Anthropic.

OpenAI Chief Executive Sam Altman said the Defense Department showed a “deep respect for safety and a desire to partner to achieve the best possible outcome.”

The standoff has also drawn criticism from legal experts. Charlie Bullock, a senior research fellow at the Institute for Law & AI, said in a Bloomberg report the authority used by the Pentagon was intended for foreign threats rather than domestic companies.

“This is not an authority that’s meant for destroying large American companies that have a contractual disagreement with the United States government,” he said. “It’s an authority that’s meant for addressing spying by Chinese companies and stuff like that.”

Anthropic, now valued at about $380 billion and projected to generate nearly $20 billion in annual revenue, has continued discussions with defense officials in recent days.

However, Emil Michael, the under secretary of defense for research and engineering, said on social media that negotiations had ended.

Amodei acknowledged the increasingly tense nature of the dispute and apologized for the tone of a leaked internal memo criticizing the administration.

According to a report by The Information, Amodei told staff that the administration’s stance toward Anthropic may stem from the company not donating or offering what he described as “dictator-style praise to Trump.”

“It was a difficult day for the company, and I apologize for the tone of the post,” he wrote.