Anthropic PBC is preparing to sue the Pentagon over a supply-chain risk designation that threatens its $200 million contract to provide classified AI tools to the US military. The company asserts the move is legally unsound and has vowed to challenge it in court. The Pentagon's action puts at risk not only Anthropic's classified work but also its ability to partner with other defense contractors like Palantir Technologies Inc., which uses Anthropic's Claude AI in military systems.

This escalation follows weeks of tense negotiations where Anthropic demanded assurances against AI use in mass surveillance or autonomous weapons, leading Defense Secretary Pete Hegseth to threaten the supply-chain designation. Though Anthropic claims the statute is narrowly tailored to avoid broader business impacts, the move complicates Pentagon AI adoption efforts where Anthropic's classified cloud tools were previously the only option. The $200 million contract and partnership restrictions now hang in the balance as the legal battle unfolds.