Anthropic reportedly resumed talks with the U.S. Defense Department to prevent the government from designating the company a supply chain risk. Negotiations broke down after Anthropic refused to delete a contract clause prohibiting the analysis of bulk acquired data. The Defense Department threatened to cancel its $200 million contract and label Anthropic a supply chain risk, a designation typically reserved for Chinese companies. President Trump ordered government agencies to stop using Anthropic’s technology, though a six-month phase-out period allowed the government to use Anthropic’s AI tools to stage an air attack on Iran.
The dispute highlights the escalating conflict between major AI developers over defense contracts and surveillance prohibitions. Anthropic’s refusal to remove the clause underscores its concern about enabling mass surveillance, while OpenAI’s subsequent contract with the Defense Department positions it as a more compliant vendor. The fallout could reshape the competitive landscape for government AI procurement.
Anthropic CEO Dario Amodei stated in a memo that the Defense Department offered to accept the company’s terms if it deleted the specific phrase about “analysis of bulk acquired data.” Amodei said the phrase “was the single line in the contract that exactly matched” the scenario the company was “most worried about.” He accused OpenAI CEO Sam Altman of spreading “just straight up lies” and suggested Anthropic’s government fallout resulted from not giving “dictator-style praise to Trump.”
OpenAI announced its Defense Department contract shortly after Anthropic’s issues surfaced. Altman stated he told the government Anthropic should not be designated a supply chain risk. Altman later posted on X that OpenAI would amend its deal to explicitly prohibit the use of its AI system for mass surveillance against Americans.
In an all-hands meeting, Altman stated that OpenAI does not make operational decisions on military use. He cited the Iran strike and Venezuela invasion as examples where the company does not weigh in. Altman said he did not know the details of Anthropic’s contract but thought Anthropic should have agreed to it if it matched OpenAI’s terms.
Anthropic signed a $200 million deal with the Defense Department in 2025. The company’s Claude chatbot rose to the top of Apple’s Top Free Apps leaderboard after OpenAI announced its Defense Department contract, beating out ChatGPT.
