In a move one government contracts attorney called “the contractual equivalent of nuclear war,” President Trump on Friday ordered every federal agency to stop using Anthropic’s AI technology — and the Pentagon declared the company a supply-chain risk to national security. It’s the kind of designation previously reserved for Chinese tech giant Huawei.
The backstory: Anthropic, maker of the Claude AI system and arguably the most technically advanced AI lab in America, signed a $200 million Pentagon contract last July. The company had just one condition — don’t use our models for fully autonomous weapons or mass domestic surveillance of American citizens. The Pentagon said no deal. A deadline passed Friday at 5:01 p.m. ET without agreement, and within hours, Trump took to Truth Social to threaten “major civil and criminal consequences.”
Defense Secretary Pete Hegseth posted on X that he was designating Anthropic a “Supply-Chain Risk to National Security” — a classification that doesn’t just kill the Pentagon contract. It potentially bars tens of thousands of defense contractors from using any Anthropic technology in their work. For a company gearing up for a blockbuster IPO, this is an existential threat to its government business and could poison private-sector relationships too.
Here’s where it gets really interesting for investors. OpenAI swooped in within hours, announcing its own classified network deal with the Pentagon. CEO Sam Altman said the Pentagon agreed to principles around human responsibility over weapons — language that sounds suspiciously similar to what Anthropic was asking for. The difference? OpenAI put it in a contract without making it a public standoff.
The ripple effects are massive. Anthropic’s backers include Google and Amazon — both of which now face questions about their association with a company the Pentagon just labeled a national security risk. SK Telecom, which owns a significant Anthropic stake and was up 57% year-to-date partly on that position, could see pressure. And every AI company in America just learned a brutal lesson: negotiate quietly, or get Huawei’d.
The bigger picture is even more unsettling. As one former National Security Council official put it, this designation arguably treats Anthropic as “a greater national security threat than any Chinese AI companies, none of whom they’ve designated supply-chain risks.” Whether you agree with Anthropic’s stance or not, the precedent is clear: in the AI arms race, the government wants unconditional compliance. Companies that resist — even American ones building the most advanced AI on the planet — will be made examples of.