OpenAI takes Pentagon contract as Anthropic faces supply-chain risk

On Saturday night, OpenAI CEO Sam Altman held a public Q&A on X to address his company’s decision to accept a contract with the U.S. Department of Defense (the Pentagon). Around 7 p.m., Altman announced he would be fielding questions regarding the contract, which OpenAI won after rival AI lab Anthropic walked away from the deal. The public discussion highlighted OpenAI’s expanding role in defense contracting, a shift from 2023 when Altman made his case to Congressional committees using a more standard startup playbook.

The transition has sparked severe regulatory friction. On Friday, U.S. Defense Secretary Pete Hegseth stated his plan to designate the lab as a supply-chain risk, which is a government designation that can restrict a company’s ability to operate or access partners. According to former Trump official Dean Ball, this designation would cut Anthropic off from hardware and hosting partners, effectively destroying the company. Ball warned of the broader systemic fallout: “Even if Secretary Hegseth backs down and narrows his extremely broad threat against Anthropic, great damage has been done. Most corporations, political actors, and others will have to operate under the assumption that the logic of the tribe will now reign.”

During the Q&A, Altman defended the decision by pointing to his belief in the democratic process and the authority of elected leaders to set national policy. He expressed surprise at the level of public disagreement over whether power should reside with a democratically elected government or unelected private companies. This debate highlights the growing friction between private AI developers and the U.S. government. During its own negotiations with the U.S. Department of Defense, Anthropic refused to participate in mass surveillance and automated killing activities, ultimately walking away from the contract that OpenAI subsequently accepted.

By entering the defense sector, OpenAI is stepping into a landscape historically dominated by established defense contractors like Raytheon and Lockheed Martin, as well as newer defense contractors like Palantir and Anduril. In this highly politicized environment, tech companies are increasingly pressured to align with specific political factions. This dynamic is visible in the reactions of Trump administration figures, including adviser David Sacks, to the ongoing conflict between the government and private AI labs.

Why it matters

The transition of AI companies from consumer startups into national security infrastructure has left them unequipped to manage new responsibilities, creating a conflict between private AI labs and the U.S. government.