Pentagon designates Anthropic as 'supply chain risk,' terminates $200M contract
What's the story
The Pentagon, through Defense Secretary Pete Hegseth, designated AI start-up Anthropic as a "Supply Chain Risk" after President Donald Trump directed federal agencies to stop using Anthropic's products. The decision comes after a public disagreement between the company and the Department of Defense over restrictions on its technology. Defense Secretary Pete Hegseth announced the designation, ordering all contractors and partners doing business with the US military to cease any commercial activity with Anthropic.
Transition timeline
Hegseth gives 6-month transition period for AI services
Hegseth has given Anthropic a six-month period to transition its AI services to another provider. He said, "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." The Defense Secretary also stressed that Anthropic's relationship with the Trump administration had been "permanently altered," due to their stance being incompatible with American principles.
Presidential order
Trump's directive terminates $200 million contract with federal government
Trump's directive came just hours before Hegseth's announcement. The President accused Anthropic of trying to "strong-arm the Department of War" and warned them of "major civil and criminal consequences" if they didn't comply with his order. His decision effectively terminates Anthropic's $200 million contract with the federal government, which accounted for a mere 1.4% of its total revenue.
Twitter Post
Here's what Hegseth wrote on X
This week, Anthropic delivered a master class in arrogance and betrayal as well as a textbook case of how not to do business with the United States Government or the Pentagon.
— Secretary of War Pete Hegseth (@SecWar) February 27, 2026
Our position has never wavered and will never waver: the Department of War must have full, unrestricted…
Compliance challenges
Anthropic's resistance leads to termination of contract
Anthropic has resisted Hegseth's ultimatum, which required the company to allow Pentagon unrestricted access to its Claude chatbot. This refusal has led to the termination of their contract with the federal government. The move poses a potential national security risk as Anthropic's Claude Gov tool was a favored option among defense personnel for its ease of use.
Industry response
OpenAI CEO expresses support for Anthropic
OpenAI CEO Sam Altman has expressed his support for Anthropic in light of the Pentagon dispute. In a memo to employees, he said his company is in talks with defense officials about using its models with similar limitations. The decision has also drawn support from workers at several major tech companies such as Amazon and Microsoft, who have called on their employers to reject Pentagon demands for unrestricted use of AI products.