Trump blacklists Anthropic, opening the door to Elon Musk and xAI

By William Gavin

 Grok will let its model be used for classified purposes, while Anthropic has balked at the idea that its products could be used for mass surveillance 

 Anthropic CEO Dario Amodei has warned that artificial intelligence has the capabilities to undermine democratic values. 

 President Donald Trump on Friday ordered the U.S. government to stop using Anthropic's artificial-intelligence models and threatened the company with "major" consequences. 

 "Anthropic better get their act together, and be helpful during this phase out period, or I will use the Full Power of the Presidency to make them comply, with major civil and criminal consequences to follow," Trump said in a post on his Truth Social platform. 

 Trump directed all federal agencies to immediately stop using Anthropic's Claude AI models. He added that the Department of Defense and other U.S. agencies have six months to phase out Anthropic's technology. 

 A representative for Anthropic did not immediately respond to MarketWatch's request for comment. On Thursday, Anthropic said it would work to enable a "smooth transition" to another provider. 

 Trump's announcement comes after days of public and private back-and-forth negotiations between the Pentagon and Anthropic that occasionally turned ugly. After Anthropic CEO Dario Amodei defended his company's refusal to budge on Thursday, a Pentagon official accused him of trying to "personally control the U.S. military." 

 "It's a shame that @DarioAmodei is a liar and has a God-complex," Emil Michael, the undersecretary of defense for research and engineering, wrote on X. Michael, a former executive at Uber Technologies (UBER), also accused Anthropic of having a plan to "impose" its values on Americans. 

 The conflict stems from Anthropic's contract with the Defense Department, which is worth up to $200 million. Anthropic has drawn a line in the sand over how the agency can use its technology. Specifically, Anthropic doesn't want its products to be used to develop autonomous weapons or for mass surveillance. 

 The Pentagon has said it has "no interest" in using AI for those purposes. 

 "In a narrow set of cases, we believe AI can undermine, rather than defend, democratic values," Amodei wrote Thursday. "Some uses are also simply outside the bounds of what today's technology can safely and reliably do." 

 But that didn't square with a Jan. 9 memo handed down by Defense Secretary Pete Hegseth that calls for AI labs to amend their defense contracts to allow "any lawful use" of their technology. Hegseth gave the department 180 days to insert that standard into any contract that involves procuring AI services. 

 "DoD does not want a private company's usage policy to function as a veto over lawful military applications," Jessica Tillipman, a professor at George Washington University's law school who specializes in government procurement law, told MarketWatch over email. 

 "If DoD makes this the default clause across all AI vendors, it eliminates vendor-by-vendor negotiation over acceptable use and signals that firms unwilling to accept that baseline will be replaced," Tillipman said. "It sounds like boring contract boilerplate, but it is really about procurement leverage." 

 Following Trump's announcement, Hegseth formally declared Anthropic as a supply-chain risk to national security, a designation previously applied only to foreign companies. As a result, no contractor, supplier or partner that does business with the U.S. military can "conduct any commercial activity with Anthropic," he said. 

 That has potentially major implications for Anthropic, which recently raised $30 billion at a $380 billion valuation and disclosed $14 billion in annual run-rate revenue, driven mostly by increasing enterprise adoption of its products. More than 500 business customers now spend over $1 million annually on Anthropic's products. 

 Microsoft (MSFT), which alongside Nvidia (NVDA) signed a strategic partnership with Anthropic last November, works with the Defense Department.  Amazon (AMZN), which has invested billions of dollars in Anthropic, recently detailed a plan to support the Pentagon through access to Amazon Web Services. 

 Before this week, Claude was the only AI model approved for classified use in the Pentagon. Claude was even used, through a Palantir Technologies (PLTR) partnership, to help the U.S. capture Venezuela's then president, Nicolás Maduro, according to the Wall Street Journal. 

 However, Elon Musk's xAI signed a deal to allow its controversial Grok model to be used for classified purposes earlier this week. Officials at multiple federal agencies have raised concerns over potential safety issues with Grok, the Journal reports. 

 A senior Pentagon official told MarketWatch that other companies are close to a similar agreement that would allow their AI models to be used for classified work. OpenAI and Alphabet's (GOOGL) (GOOG) Google have made versions of their AI models, ChatGPT and Gemini, available on the Defense Department's GenAI.mil enterprise platform used by civilian and military personnel. 

 Representatives for Google and OpenAI did not immediately respond to a request for comment. 

 See: Amazon, Nvidia and SoftBank pour $110 billion into OpenAI - raising the stakes for AI monetization 

 -William Gavin 

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02-27-26 1802ET

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