Trump orders federal agencies to stop using Anthropic's technology, and Hegseth declares it a 'supply-chain risk'

• Trump said he's directing all federal agencies to stop using Anthropic's tech.
• It comes amid a dispute between the AI giant and the Department of Defense.
• Shortly after Trump's announcement, the DOD moved to label Anthropic a supply-chain risk

The Department of Defense is moving to designate Anthropic a supply chain risk, a significant escalation by the government that could threaten how the AI startup does business with other US-based companies.

In an X post on Friday, Defense Secretary Pete Hegseth said that he would be directing his department to label Anthropic a "supply-chain risk to national security."

"Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic," Hegseth said in the post.

The move, which amounts to a blacklisting of a US-based company, came shortly after President Donald Trump ordered federal agencies to stop using Anthropic's technology.

"We don't need it, we don't want it, and will not do business with them again," Trump wrote on Truth Social on Friday.

It comes amid a dispute between the AI giant and the Department of Defense.

Trump said that there would be a six-month phase-out period for departments, including the Department of Defense, that are "using Anthropic's products, at various levels."

"WE will decide the fate of our Country — NOT some out-of-control, Radical Left AI company run by people who have no idea what the real World is all about," Trump wrote.

Trump's announcement comes just a few hours before the Friday evening deadline defense officials had given Anthropic to agree to the military's terms of use for the company's frontier model, Claude.

Earlier this week, the two parties came to an impasse over how the military can deploy Claude.

The issue appeared to revolve around two safeguards Anthropic was not willing to drop: mass surveillance of US citizens and autonomous weapons.

Hegseth had given Anthropic's CEO Dario Amodei until Friday, 5:01 p.m. Eastern Time to get on board with the military. Hegseth also warned that the government could invoke the Defense Production Act — a wartime law that gives the president broad authority over a company's resources — and designate Anthropic as a supply chain risk.

Both would be unprecedented moves by the government against an American technology company, experts previously told Business Insider.

On Thursday, Amodei published a blog post stating that the Defense Department had added language to its contract allowing for "any lawful use" of its model.

A source familiar with the negotiations told Business Insider that this language effectively gave the military discretion over how it uses Claude.

The Anthropic CEO said in his post that the company would prefer to continue serving the department but that it could not "in good conscience accede to their request."