The Pentagon said in a statement Thursday that it has “officially informed Anthropic leadership the company and its products are deemed a supply chain risk, effective immediately.”

The decision appeared to shut down the opportunity for further negotiation with Anthropic, nearly a week after President Donald Trump and Defense Secretary Pete Hegseth accused the company of endangering national security.

Trump and Hegseth announced a series of threatened punishments last Friday, on the eve of the Iran war, after Anthropic CEO Dario Amodei refused to back down over concerns the company’s products could be used for mass surveillance of Americans or autonomous weapons.

Amodei said in a statement Thursday that “we do not believe this action is legally sound, and we see no choice but to challenge it in court.”

The Pentagon statement said, “this has been about one fundamental principle: the military being able to use technology for all lawful purposes. The military will not allow a vendor to insert itself into the chain of command by restricting the lawful use of a critical capability and put our warfighters at risk.“

Amodei countered that the narrow exceptions Anthropic sought to limit surveillance and autonomous weapons “relate to high-level usage areas, and not operational decision-making.”

He said there were “productive conversations” with the Pentagon in recent days over whether it could keep using Claude or establish a “smooth transition” if no agreement was reached. Trump gave the military six months to phase out Claude, which is already widely embedded in military and national security platforms. Amodei said it’s a priority to make sure warfighters won’t be “deprived of important tools in the middle of major combat operations.”

Some military contractors were already cutting ties with Anthropic, a rising star in the tech industry that sells Claude to a variety of businesses and government agencies. Lockheed Martin said it will “follow the President’s and the Department of War’s direction” and look to other providers of large language models.

“We expect minimal impacts as Lockheed Martin is not dependent on any single LLM vendor for any portion of our work,” the company said.

How the Defense Department will interpret the scope of the risk designation is unclear. Amodei said a notification Anthropic received from the Pentagon on Wednesday shows it only applies to Claude’s use by customers as a “direct part of” their military contracts.

Microsoft said its lawyers studied the rule and the company “can continue to work with Anthropic on non-defense related projects.”

Pentagon draws criticism for its decision

The Pentagon’s decision to apply a rule designed to address supply threats posed by foreign adversaries was met with broad criticism. Federal codes have defined supply chain risk as a “risk that an adversary may sabotage, maliciously introduce unwanted function, or otherwise subvert” a system in order to disrupt, degrade or spy on it.

U.S. Sen. Kirsten Gillibrand, a New York Democrat and member of the Senate Armed Services Committee and Senate Intelligence Committee, called it “a dangerous misuse of a tool meant to address adversary-controlled technology.”

“This reckless action is shortsighted, self-destructive, and a gift to our adversaries,” she said in a written statement Thursday.

Neil Chilson, a Republican former chief technologist for the Federal Trade Commission who now leads AI policy at the Abundance Institute, said the decision looks like “massive overreach that would hurt both the U.S. AI sector and the military’s ability to acquire the best technology for the U.S. warfighter.”

Earlier in the day, a group of former defense and national security officials sent a letter to U.S. lawmakers expressing “serious concern” about the designation.

“The use of this authority against a domestic American company is a profound departure from its intended purpose and sets a dangerous precedent,” said the letter from former officials and policy experts, including former CIA director Michael Hayden and retired Air Force, Army and Navy leaders.

They added that such a designation is meant to “protect the United States from infiltration by foreign adversaries — from companies beholden to Beijing or Moscow, not from American innovators operating transparently under the rule of law. Applying this tool to penalize a U.S. firm for declining to remove safeguards against mass domestic surveillance and fully autonomous weapons is a category error with consequences that extend far beyond this dispute.”

Anthropic sees boost in consumer downloads

While losing big partnerships with defense contractors, Anthropic experienced a surge of consumer downloads over the past week due to people siding with its moral stance. More than a million people signed up for Claude each day this week, the company said, lifting it past OpenAI’s ChatGPT and Google’s Gemini as the top AI app in more than 20 countries in Apple’s app store.

The dispute with the Pentagon has also further deepened Anthropic’s bitter rivalry with OpenAI that started when ex-OpenAI leaders, including Amodei, started Anthropic in 2021.

Hours after the Pentagon punished Anthropic last Friday, OpenAI announced a deal to effectively replace Anthropic with ChatGPT in classified military environments.

OpenAI said it sought similar protections against domestic surveillance and fully autonomous weapons but later had to amend its agreements, leading CEO Sam Altman to say he shouldn’t have rushed a deal that “looked opportunistic and sloppy.”

Amodei also expressed regret about his own part in that “difficult day for the company,” saying Thursday he wanted to “directly apologize” for an internal note he sent to Anthropic staff that attacked OpenAI’s behavior and suggested Anthropic was being punished for not giving ”dictator-like praise” to Trump.