Pentagon gives AI firm ultimatum: lift military limits by Friday or lose $200M deal

The Pentagon has given artificial intelligence firm Anthropic until Friday to lift restrictions on how its Claude AI system can be used by the military, warning it could cancel a $200 million contract or take other punitive steps if the company refuses, according to multiple sources familiar with the discussions. Hegseth told Amodei that if the company did not allow Claude to be used for all lawful purposes, it could face termination of its Pentagon contract, designation as a supply chain risk — potentially limiting its ability to work with defense vendors — or possible invocation of the Defense Production Act to compel access to the technology, according to sources familiar with the meeting. During Tuesday’s meeting, Hegseth explicitly referenced potential use of the Defense Production Act, termination of Anthropic’s existing contract and the possibility of designating the company a supply chain risk if it does not agree to allow its products to be used for all lawful purposes, sources said.