Anthropic vs Pentagon: US designates AI firm as ‘supply chain risk’ amid feud, terminates $200 million contract

The Pentagon on Friday declared Anthropic as a Supply Chain Risk after US President Donald Trump ordered government agencies of his country to stop using the AI startup's products, effectively capping the feud between the startup and the US military over guardrails on its technology.

Defense Secretary Pete Hegseth in a post announced the decision, asking the Pentagon to stop its contractors and their partners from doing any kind of business with Anthropic.

“In conjunction with the President's directive for the Federal Government to cease all use of Anthropic's technology, I am directing the Department of War to designate Anthropic a Supply-Chain Risk to National Security,” Hegseth said.

“Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic,” he added.

Hegseth set a six-month period for Anthropic to hand over AI services to another provider.

“Anthropic will continue to provide the Department of War its services for a period of no more than six months to allow for a seamless transition to a better and more patriotic service,” the Defense Secretary wrote in his post.

He said that Anthropic's relationship with the Trump administration had been “permanently altered”.

“Anthropic’s stance is fundamentally incompatible with American principles. Their relationship with the United States Armed Forces and the Federal Government has therefore been permanently altered,” Hegseth wrote.

“America’s warfighters will never be held hostage by the ideological whims of Big Tech. This decision is final,” he added.

What did Donald Trump say?

Pete Hegseth's directive came hours after Donald Trump asked federal agencies to drop Anthropic and its services from their usage.

“The Leftwing nut jobs at Anthropic have made a DISASTROUS MISTAKE trying to STRONG-ARM the Department of War, and force them to obey their Terms of Service instead of our Constitution,” Trump wrote on Truth Social.

He warned that if the company failed to comply, it will “major civil and criminal consequences”. The president did not specify what consequences Anthropic would face.

“Therefore, I am directing EVERY Federal Agency in the United States Government to IMMEDIATELY CEASE all use of Anthropic’s technology.”

What does the decision mean for Anthropic?

Trump and Hegseth's decision effectively means that Anthropic will lose its $200 million contract with the federal government. However, that contract was 1.4% of Anthropic's $14 billion revenue.

What may come as a concern is the designation of Anthropic as a supply chain risk, which is the same one used for Chinese companies like Huawei for the apparent security threats they pose. This bars all companies with US contracts from using Claude or other Anthropic services in their Pentagon operations. It remains to be seen how these companies respond to the order and whether they remove the AI startup from their books as a whole.

Hegseth had given the company until 5:01 p.m. on Friday to allow the Pentagon to use the Claude chatbot for any purpose within legal limits, but the firm and its CEO Dario Amodei had resisted.

Ousting Anthropic from the government creates a potential national security challenge, given that the company was until recently the only AI system that could operate in the Pentagon’s classified cloud. Its Claude Gov tool is a favored option among defense personnel for its ease of use.

OpenAI CEO Sam Altman had rallied behind Anthropic on Friday, telling employees in a memo seen by Bloomberg that his company was talking to defense officials about using its models with similar limits.

The move is also likely to provoke blowback from Silicon Valley, where workers rallied to Anthropic’s side. Workers at several major tech companies including Amazon.com Inc. and Microsoft Corp. had called for their employers to reject Pentagon demands for unrestricted use of AI products.