The Department of Defense officially informed Anthropic leadership on Thursday that the company and its products have been designated a supply chain risk, effective immediately, according to a senior defense official, marking the first time the U.S. has applied the designation typically reserved for foreign adversaries against an American company.
"DOW officially informed Anthropic leadership the company and its products are deemed a supply chain risk, effective immediately," the official told Bloomberg News, using Defense Secretary Pete Hegseth's preferred acronym for the Department of War, the rebranded name for the Department of Defense.
The formal notification comes six days after Hegseth posted on social media that he was directing the DOD to label Anthropic a "Supply-Chain Risk to National Security." The designation requires any company or agency that does work with the Pentagon to certify that it doesn't use Anthropic's models in their contracts with the military.
Dispute Over Autonomous Weapons and Surveillance
The conflict centers on how Anthropic's Claude AI models can be used by the military. The DOD demanded Anthropic grant the agency unfettered access to Claude across all lawful purposes, while Anthropic sought assurances that its technology would not be deployed for fully autonomous weapons with no human oversight or mass domestic surveillance of Americans.
Anthropic CEO Dario Amodei outlined the company's position in a statement last week, writing that using the technology for mass domestic surveillance would be "incompatible with democratic values." On autonomous weapons, Amodei stated that today's frontier AI models are "simply not reliable enough" to operate without human involvement in targeting and firing decisions.
"From the very beginning, this has been about one fundamental principle: the military being able to use technology for all lawful purposes," the senior defense official told CNBC on Thursday, rejecting Anthropic's proposed limitations.
President Trump directed federal agencies to "immediately cease" all use of Anthropic's technology on Friday, February 27, with a six-month phaseout period. Trump told Politico he "fired [them] like dogs" for refusing Pentagon demands.
Claude Used in Iran Despite Designation
The designation creates operational complications for the Pentagon itself. Even as the dispute escalated, U.S. military forces have relied on Claude models to manage data in operations during the ongoing Iran conflict, which entered its sixth day on Thursday.
Claude is one of the main tools installed in Palantir's Maven Smart System, which military operators in the Middle East depend on for processing operational data, according to Bloomberg. Anthropic had been the only frontier AI lab with classified-ready systems approved for deployment across the DOD's classified networks until OpenAI and xAI recently received clearance.
Transitioning away from Anthropic toward new vendors "takes time and comes at a significant cost in terms of efficiency," said Jacquelyn Schneider, a Hoover fellow at Stanford's Hoover Institution. OpenAI and xAI systems can't be deployed or adopted overnight despite receiving security clearances.
Unprecedented Designation Draws Criticism
Legal and supply chain experts called the move unprecedented and potentially dangerous for innovation. The designation is typically used against foreign adversaries like Chinese telecommunications companies, not American AI startups.
Dean Ball, a former Trump White House AI adviser, referred to the designation as a "death rattle" of the American republic, arguing the government has abandoned strategic clarity in favor of "thuggish" tribalism that treats domestic innovators worse than foreign adversaries.
Nada Sanders, a professor of supply chain management at Northeastern University, warned the move suggests the government may be using supply chain authority as leverage in negotiations with U.S. businesses. "This creates a new reality," Sanders said. "This may mean contract terms may become less negotiable" for technology companies working with federal agencies.
Anthropic said in a statement Friday it will challenge "any supply chain risk designation in court." The company argues the DOD does not have authority to block organizations working with the military from doing business with Claude, claiming the designation only applies to Department of Defense contracts specifically.
Amodei reportedly told staffers the administration does not like Anthropic because it has not donated or offered "dictator-style praise to Trump," according to The Information. Amodei notably did not attend Trump's inauguration, contrasting with other tech CEOs including Sam Altman, Tim Cook, and Sundar Pichai.
