The Trump administration has decided to blacklist Anthropic in the most consequential and controversial policy decision to date at the intersection of artificial intelligence and national security, President Trump announced. The big picture: Anthropic rebuffed the Pentagon's demand to lift all safeguards on the military's use of its model, Claude, due to its concerns about the use of AI for mass domestic surveillance and the development of weapons that fire without human involvement. Driving the news: The Pentagon is now following through on its threat to declare Anthropic a "supply chain risk," a penalty usually reserved for companies from adversarial countries, such as Chinese tech giant Huawei. The department plans to sever its contract with Anthropic, valued at up to $200 million, and require companies it works with to certify they don't use Claude in those workflows. Anthropic will also be barred from all other government work . There will be a six-month wind down period to allow the Pentagon, its customers and other government agencies to onboard alternatives to Claude. The decision is particularly extraordinary because Claude is the only AI model currently used in the military's classified systems. It was used in the operation to capture Nicolás Maduro and could conceivably be used in a potential military operation in Iran. Defense officials praised Claude's capabilities in conversations with Axios, with one admitting it would be a "huge pain in the ass" to disentangle. There will be a wind down period to allow vendors to offload Claude, according to a source familiar. The decision is also complicated for AI software firm Palantir, which uses Claude to power its most sensitive work with the military and will likely now need to strike a deal with one of Anthropic's competitors. What they're saying: The Pentagon put its ultimatum in writing on Wednesday night, reiterating its demand that Anthropic agree to let the military use its technology for "all lawful purposes." Anthropic CEO Dario Amodei responded with a public statement laying out the company's concerns and stating "we cannot in good conscience accede to their request." Emil Michael, the senior Pentagon official who has been steering the negotiations with Anthropic and other AI firms, responded by calling Amodei a "liar" with a "God complex" who was "ok putting our nation's safety at risk." Neither Anthropic nor the Pentagon immediately responded to a request for comment. What to watch: Anthropic has not yet said whether it will attempt to fight the designation in court. The company has hundreds of millions of dollars on the line, given the possibility that many firms that work with the government, or hope to in future, will steer clear of Claude. Anthropic has been growing at a staggering rate and establishing dominance in some key enterprise use cases for AI. Amodei and his company have garnered widespread praise in the past 24 hours for their principled stand. It's not yet clear how expensive that stand will be. The other side: The Pentagon argues that there are many gray areas around what constitutes mass surveillance or autonomous weaponry, and that it's unworkable to have to litigate individual cases with a private company. Their argument is that once the military buys a tool, it has its own standards and procedures to determine whether and how to use it. Defense Secretary Pete Hegseth has railed against "woke AI," and the Trump administration has grown increasingly antagonistic toward Anthropic in particular, even as the military has grown more reliant on its model. "The only reason we're still talking to these people is we need them and we need them now. The problem for these guys is they are that good," a Defense official told Axios ahead of the tense meeting between Hegseth and Amodei on Tuesday. What's next: Elon Musk's xAI recently signed an agreement to let the military use its model, Grok, in classified systems. Sources say it's unlikely to be a like-for-like replacement for Claude. Google's Gemini and OpenAI's ChatGPT are both available in unclassified systems, and the Pentagon is accelerating conversations about bringing them into the classified space. Hundreds of employees from Google and OpenAI have signed a petition in the past 24 hours calling on their companies to mirror Anthropic's position. OpenAI CEO said in a memo to staff on Thursday night that the company will uphold the same red lines as Anthropic on surveillance and autonomous weapons, but still hopes to strike a deal with the Pentagon.