OpenAI sweeps in to ink deal with Pentagon as Anthropic is designated a ‘supply chain risk’—an unprecedented action likely to crimp its growth

OpenAI announced late Friday it reached a deal for the Pentagon to use its AI models in classified systems, just hours after the U.S. government designated OpenAI arch-rival Anthropic a “supply chain risk” in a move that threatens to deal a serious blow to Anthropic’s business.

Legal and policy experts said the government’s unprecedented decision presents profound questions about the relationship between the government and business in the U.S. It is the first time the U.S. has ever designated an American company a supply chain risk, and the first time the designation has been used in apparent retaliation for a business not agreeing to certain contractual terms. Anthropic said in a statement Friday that it would take legal action to try to overturn the Pentagon’s designation.

In a statement announcing its deal, OpenAI CEO Sam Altman said that its agreement with the Pentagon contains the same two limitations on how the military can use its technology that Anthropic had been insisting on and which the government has said it could not accept.

But OpenAI seems to have sought to enshrine these in the agreement in a differ...