Battle of the AI: Trump bans Anthropic as OpenAI wins Pentagon deal

President Donald Trump ordered all federal agencies to stop using Anthropic products on Friday, according to NPR. The move reportedly followed a dispute over the company's AI restrictions for military use. Defense Secretary Pete Hegseth labeled Anthropic a supply chain risk to national security.

Trump called the company's stance a "disastrous mistake" in a Truth Social post. "The Leftwing nut jobs at Anthropic have made a DISASTROUS MISTAKE trying to STRONG-ARM the Department of War, and force them to obey their Terms of Service instead of our Constitution," he wrote. The order includes a six-month phaseout, NPR reports.

OpenAI steps in with safeguards deal

Hours later, OpenAI CEO Sam Altman announced a deal for its AI tools in the Pentagon's classified systems, according to CNN. The agreement includes guardrails on key issues. Altman shared the news on X.

"Two of our most important safety principles are prohibitions on domestic mass surveillance and human responsibility for the use of force, including for autonomous weapon systems. The DoW agrees with these principles, reflects them in law and policy, and we put them into our agreement," Altman said on the social media platform, as reported by CNN.

OpenAI will send engineers to the Pentagon for oversight. According to CNN, Altman urged the government to offer similar terms to all AI firms. He noted a desire to de-escalate toward reasonable agreements.

Anthropic refused Pentagon demands to allow its Claude model for all lawful uses, including mass domestic surveillance and fully autonomous weapons, NPR confirmed. The company cited reliability risks and rights violations. "We do not believe that today's frontier AI models are reliable enough to be used in fully autonomous weapons," Anthropic said in a statement.

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Negotiations failed despite months of talks. The Pentagon set a 5:01 p.m. ET deadline Friday, NPR noted. It threatened the Korean War-era Defense Production Act and blacklisting.

Hegseth accused Anthropic of "arrogance and betrayal," according to NPR. He reportedly said it tried to seize "veto power over the operational decisions of the United States military."

Anthropic plans to challenge the designation in court. "We believe this designation would both be legally unsound and set a dangerous precedent," the company said in its statement. CEO Dario Amodei stood firm Thursday: "We cannot in good conscience accede to their request."

The clash hits as Anthropic, valued at $380 billion with $14 billion revenue, eyes an IPO, according to NPR. Its $200 million Pentagon contract was small but symbolic. Rivals like OpenAI, Google and xAI have similar defense deals allowing broader use.

Experts call the standoff unusual in Pentagon contracting. It highlights tensions over AI limits in national security.