Anthropic ratchets up its Pentagon battle as it sues the government

By William Gavin

Anthropic has been designated a supply-chain risk by the government, a move that the company says could cost it hundreds of millions of dollars in private deals

The Pentagon last week officially designated Anthropic as a supply-chain risk.

The artificial-intelligence lab Anthropic has sued several U.S. federal agencies and leaders, including Defense Secretary Pete Hegseth, after the Pentagon labeled it a "supply-chain risk."

"These actions are unprecedented and unlawful. The Constitution does not allow the government to wield its enormous power to punish a company for its protected speech," Anthropic said in a complaint filed in a California federal district court on Monday. "No federal statute authorizes the actions taken here."

On Feb. 28, President Donald Trump ordered the U.S. government to stop using Anthropic's Claude AI model and threatened the firm with "major" consequences.

The Pentagon later labeled Anthropic as a supply-chain risk to national security, a classification previously reserved for foreign entities. In a recent note to investors, Wedbush analyst Dan Ives previously called it a "scarlet-letter designation."

The conflict originated with Anthropic's $200 million contract with the Defense Department and its reluctance to give the agency permission to use its AI for "any lawful use." The AI company said it was concerned that Claude could be used for domestic surveillance or in the development of fully autonomous weapons.

The dispute "has been about one fundamental principle: the military being able to use technology for all lawful purposes. The military will not allow a vendor to insert itself into the chain of command by restricting the lawful use of a critical capability and put our warfighters at risk," the Pentagon said last week.

The Pentagon on Monday declined to comment on Anthropic's lawsuit.

In a statement, White House spokesperson Liz Huston told MarketWatch that Trump and Hegseth "are ensuring America's courageous warfighters have the appropriate tools they need to be successful and will guarantee that they are never held hostage by the ideological whims of any Big Tech leaders."

Anthropic said in the complaint that its current government contracts are being canceled, while the Pentagon's actions have jeopardized "hundreds of millions of dollars" in current and future contracts with private groups. Much of Anthropic's revenue comes from deals with business customers, some of which are also government contractors.

Don't miss: Anthropic's meteoric rise shocked the market - but the AI crown remains up for grabs

Last week, Amazon.com (AMZN), Microsoft (MSFT) and Google parent Alphabet (GOOGL) each said they would continue to work with Anthropic and provide customers access to Claude on non-defense-related matters. Others, including Lockheed Martin (LMT) and Leidos (LDOS), said they were willing to adjust their technology stacks to abide by the Trump administration's directions.

"We have already seen the Treasury Department and a number of other government agencies announce they will stop using Claude, but there may be further ripple effects on the enterprise front as the lawsuit plays out front and center," Ives wrote on Monday.

Just hours after Trump blacklisted Anthropic, OpenAI announced a deal with the Pentagon that CEO Sam Altman later admitted appeared "opportunistic and sloppy." Elon Musk's xAI also has a deal allowing the Pentagon to use its AI models.

Read: Facing backlash, OpenAI's Sam Altman says he made a 'sloppy' mistake in Pentagon deal

-William Gavin

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-09-26 1241ET