TLDR

  • The Pentagon’s $200M agreement with Anthropic fell apart when defense officials demanded removal of contractual language limiting “analysis of bulk acquired data”
  • Federal agencies received direction from President Trump to cease using Anthropic’s technology; Defense Secretary Hegseth planned to classify the company as a supply-chain security threat
  • OpenAI moved quickly to secure its own Pentagon agreement, though CEO Sam Altman later acknowledged the company “shouldn’t have rushed” and advocated against supply-chain risk designation for Anthropic
  • Claude rose to the top position on Apple’s App Store during the controversy, while Anthropic’s annualized revenue climbed from $14 billion to $19 billion
  • Anthropic CEO Dario Amodei and Pentagon representatives have reopened negotiations

AnthropIC CEO Dario Amodei has returned to the negotiating table with U.S. Department of Defense officials following the breakdown of discussions about military applications of Claude AI on Friday, The Financial Times reports.

Amodei is currently engaged in discussions with Emil Michael, under-secretary of defense for research and engineering, working to restore an agreement that would govern Pentagon utilization of Claude models.

The Pentagon had secured a $200 million contract making Claude the first major AI model operating within the government’s classified network infrastructure. Officials finalized the agreement by mid-2025.

Negotiations reached an impasse when DoD officials requested that Anthropic remove specific language addressing “analysis of bulk acquired data” from the contract provisions. Amodei indicated in an internal communication that this language addressed his primary concern.

AnthropIC had pursued contractual protections ensuring its technology would remain outside the scope of domestic surveillance operations and autonomous weapons systems. Pentagon representatives countered that the department required flexibility to employ the technology for all lawful applications.

Michael had earlier criticized Amodei publicly on X, labeling him a “liar” with a “God complex.” This public statement appeared days before negotiations collapsed entirely.

President Trump subsequently instructed federal agencies to discontinue use of Anthropic’s technology. Defense Secretary Pete Hegseth announced plans to classify the company as a supply-chain risk to national security.

OpenAI Steps In — Then Steps Back

Within hours of the White House action against Anthropic, OpenAI revealed a new Pentagon partnership. The swift timing sparked public criticism.

ChatGPT experienced increased app deletions, while Claude ascended to the number one spot on the Apple App Store. Anthropic’s annualized revenue trajectory jumped from $14 billion to $19 billion within weeks.

OpenAI CEO Sam Altman subsequently acknowledged his company “shouldn’t have rushed” into the agreement. He stated on X that Anthropic deserved protection from supply-chain risk designation, and recommended that the DoD extend identical terms to Anthropic as those OpenAI had accepted.

AnthropIC investors, including Amazon CEO Andy Jassy, engaged in direct conversations with Amodei about the situation. Additional investors contacted the Trump administration seeking to prevent a comprehensive ban on Anthropic’s AI for Pentagon contractors.

Several investors expressed dissatisfaction, characterizing the challenge as equally about “ego and diplomacy” as policy considerations.

Anthropic’s Business at Stake

Enterprise contracts represent approximately 80% of Anthropic’s revenue stream. The company’s planned IPO relies substantially on sustained revenue expansion.

A technology sector coalition featuring Nvidia, Google, and Anthropic submitted a letter to Hegseth on Wednesday raising concerns about classifying a U.S.-based company as a supply-chain threat.

Supporters assembled outside Anthropic’s headquarters, leaving chalk messages on the pavement. One message stated: “God loves Anthropic.”

According to current reports, conversations between Anthropic and Pentagon officials continue, though specific terms remain undisclosed.