Anthropic Sues Pentagon Over Supply Chain Risk Designation

AI startup claims billions in lost revenue from partners backing out of deals due to government warning.

Published on Mar. 9, 2026

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Anthropic, an AI company, has filed lawsuits against the U.S. government alleging that its designation as a supply chain risk by the Department of Defense has already cost the company hundreds of millions in lost revenue this year and could ultimately result in billions in lost sales. The company claims current customers and prospective partners have been demanding new contract terms or backing out of negotiations entirely due to the government's warning, which bars certain contractors from doing business with Anthropic.

Why it matters

Anthropic's legal battle with the Pentagon highlights the high stakes for AI companies as they navigate complex relationships with the U.S. government. The supply chain risk designation could have far-reaching consequences for Anthropic's business, potentially impacting its ability to work with a wide range of commercial partners beyond just military contractors.

The details

According to court filings, Anthropic's chief financial officer Krishna Rao stated that hundreds of millions in expected revenue this year from Pentagon-related work is already at risk. And if the government pressures a broader range of companies to avoid doing business with Anthropic, the company could ultimately lose billions in sales. Anthropic has spent over $10 billion to train and deploy its AI models, which have been gaining ground on rival technologies.

  • Anthropic was designated a supply chain risk by the U.S. Department of Defense in late February 2026.
  • Anthropic filed lawsuits against the U.S. government in San Francisco federal court and the federal appeals court in Washington, D.C. on March 9, 2026.

The players

Anthropic

An AI startup that has seen its revenue explode as its Claude AI models have outperformed rivals and shown advanced capabilities.

U.S. Department of Defense

The government agency that designated Anthropic as a supply chain risk, barring certain contractors from doing business with the company.

Krishna Rao

Anthropic's chief financial officer who stated the company could lose billions in sales due to the supply chain risk designation.

Paul Smith

Anthropic's chief commercial officer who provided examples of partners backing out of deals due to the government's warning.

Pete Hegseth

U.S. Defense Secretary who posted on social media that no contractor, supplier, or partner doing business with the military may conduct any commercial activity with Anthropic.

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What they’re saying

“Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic.”

— Pete Hegseth, U.S. Defense Secretary (X)

“All have taken steps that reflect deep distrust and a growing fear of associating with Anthropic.”

— Paul Smith, Anthropic Chief Commercial Officer (Wired)

What’s next

Anthropic is seeking a hearing as soon as Friday in San Francisco federal court for a temporary reprieve that would allow the company to continue doing business with the Department of Defense until the lawsuits are resolved.

The takeaway

Anthropic's legal battle with the Pentagon underscores the high-stakes nature of AI companies' relationships with the U.S. government. The supply chain risk designation could have far-reaching consequences for Anthropic's business, potentially impacting its ability to work with a wide range of commercial partners beyond just military contractors.