Investors Urge Resolution in Anthropic's Pentagon AI Battle

The Information Technology Industry Council, a technology industry group, has expressed concern over the U.S. Defense Department's decision to declare artificial intelligence company Anthropic a supply-chain risk. The council's members include major Anthropic backers Amazon and Nvidia. Other investors are working to contain the fallout from Anthropic’s ongoing dispute with the U.S. Defense Department, which the Trump administration renamed the Department of War.

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In a letter, the Information Technology Industry Council, whose members include Nvidia, Amazon.com, Apple, and OpenAI, stated, "We are concerned by recent reports regarding the Department of War’s consideration of imposing a supply-chain risk designation in response to a procurement dispute." The letter did not explicitly name Anthropic.

In recent days, Anthropic Chief Executive Officer Dario Amodei has discussed the matter with key investors and partners, including Amazon.com Chief Executive Officer Andy Jassy. Venture capital firms Lightspeed and Iconiq have also contacted Anthropic executives.

Lightspeed and Iconiq are also engaging with other investors to explore potential solutions. Some investors are reaching out to their contacts within the Trump administration, hoping to ease tensions and prevent a ban of Anthropic's AI from all Pentagon contractors.

Anthropic and the Department of War are continuing discussions. The dispute stems from a months-long disagreement over how the military can utilise Anthropic's technology on the battlefield.

The clash is widely seen as a referendum on the level of control AI companies can maintain over their developed technology. The Pentagon has urged AI companies to remove strict limitations, favouring an "all-lawful use" clause.

Anthropic has, however, refused to compromise on its bans against its Claude AI powering autonomous weapons and facilitating mass U.S. surveillance. Anthropic was among the first AI companies to handle classified information through a supply deal via cloud provider Amazon.

OpenAI stated that it has secured its own classified deal with the Department of War and argued that Anthropic should not be designated a risk. Connie LaRossa, who focuses on national security policy at OpenAI, outlined their shared "red lines".

LaRossa stated, "Our red lines were the same as Anthropic's, which is at this point in time, no domestic surveillance and no use of AI for autonomous weapons." LaRossa added, "We are actually working to have the secure risk designation removed from Anthropic... That shouldn't be applied to a U.S. industry counterpart with such an important tool."

During discussions with Anthropic executives, investors have reaffirmed their support for the San Francisco-based AI laboratory while also expressing a desire to find a resolution with the Pentagon. Some investors voiced frustration that Chief Executive Officer Amodei antagonised rather than cultivated Department of War officials.

An individual briefed on the matter described the situation as "an ego and diplomacy problem." Investors believe that Amodei cannot be perceived as yielding to the administration without alienating a core group of employees and consumers drawn to Anthropic due to his stance.

Chief Executive Officer Amodei has stated that Anthropic cannot "in good conscience accede to their request." He informed investors that the company would "continue to work to figure out a solution with the DoW."

Investors involved in the Department of War talks aim to help Anthropic avoid a "supply-chain risk" designation from the U.S. government. Such a designation, if implemented, could severely impact the startup's rapidly growing sales to business customers.

Demand has increased for Anthropic's products, including its chatbot Claude and coding assistant Claude Code. Claude was the most-downloaded free app in the Apple App Store on Monday, surpassing OpenAI's ChatGPT.

Defense Secretary Pete Hegseth has stated that such a risk designation would necessitate all government contractors ceasing to use Anthropic's technology across their business operations. Anthropic has publicly challenged Hegseth's comments, asserting he lacks the statutory authority to block its AI use outside of defence contracts.

Anthropic also announced it would legally challenge any supply-chain risk designation in court. Some investors worry the dispute could deter potential customers who wish to avoid government scrutiny.

These concerns arise at a critical juncture for the startup. Anthropic has raised tens of billions of USD with high expectations for its enterprise sales, which constitute about 80% of its revenue.

The success of future share sales, including its anticipated initial public offering, relies on Anthropic's continued expansion of its business revenue. Anthropic is currently allowing employees to sell shares to investors, and the company has previously stated that an IPO decision has not yet been made.

Anthropic's projected annual revenue, or revenue run rate, is approximately USD 19 billion, an increase from USD 14 billion a few weeks prior. This push from investors coincides with several U.S. government agencies terminating their use of Anthropic's technology.

The State Department, for instance, has switched to rival OpenAI, following President Donald Trump's order for government agencies to discontinue using Anthropic within the next six months.

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• The Information Technology Industry Council expressed concern over the Department of War's "supply-chain risk" designation for Anthropic.

• Anthropic is in a months-long dispute with the Pentagon over military use of its AI technology, refusing to allow it for autonomous weapons or mass U.S. surveillance.

• Major investors, including Amazon and Nvidia, are engaging with Anthropic and the administration to de-escalate tensions and avoid a ban on its AI for government contractors.

Source: REUTERS