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The Pentagon warned Anthropic PBC that it would terminate the company’s military contracts on Friday if the artificial intelligence startup failed to meet government terms for use of its technology, according to people familiar with the matter.

During a meeting Tuesday between Chief Executive Officer Dario Amodei and Defense Secretary Pete Hegseth, US officials threatened to declare Anthropic a supply-chain risk or invoke the Defense Production Act to use the AI software even if the company didn’t comply, the people said.

The ultimatum marks an escalation in a growing dispute between the Defense Department and the AI startup over the company’s insistence on guardrails for use of its Claude AI tool. If carried out, the Pentagon’s threat would put at risk up to $200 million in work that Anthropic had agreed to do for the military.

Bloomberg Washington Correspondents Joe Mathieu and Kailey Leinz deliver insight and analysis on the latest headlines from the White House and Capitol Hill, including conversations with influential lawmakers and key figures in politics and policy. On this edition, Joe speaks with:

• Bloomberg Senior Editor for Technology and Strategic Industries Michael Shepard.
• Stonecourt Capital Partner Rick Davis and Harvard Kennedy School's Ash Center Visiting Democracy Fellow Jeanne Sheehan Zaino.
• Center for Strategic and International Studies Senior Adviser Gregory Allen.