After offending the Department of Defense, the collaboration between Anthropic and Palantir is also likely to fail

The Pentagon's ban not only caused AI unicorn Anthropic to lose a major military contract but also triggered a domino effect, forcing the U.S. government’s "designated" data giant Palantir to consider severing ties with it completely.

According to a recent report by The Information, Anthropic has been providing services to the U.S. government through Palantir for over a year. Palantir's clients utilize Anthropic's models to identify patterns in vast amounts of confidential data to assist in decision-making. However, with the Department of Defense designating Anthropic as a "supply chain risk," this partnership is in jeopardy.

As a favored government contractor, approximately 42% of Palantir's nearly $4.5 billion revenue last year came from U.S. government contracts. If Palantir stops using Anthropic in federal work, it will cut off a revenue source for this AI startup. Although this portion of sales contributes little to Anthropic's projected $18 billion revenue this year, losing Palantir as a key partner is undoubtedly a setback for Anthropic's expansion in the large client market.

Palantir may need to modify software, CEO subtly criticizes Anthropic

According to media reports citing informed sources, Palantir provides customized software and AI applications for its clients, some of which are specifically designed to work with Anthropic's Claude model. If it abandons Claude, Palantir will have to modify its services, which could take several weeks. However, Palantir can turn to other AI model providers and generate roughly the same revenue from those contracts.

Palantir CEO Alex Karp appeared to criticize Anthropic indirectly during a defense technology summit in Washington on Tuesday. He condemned Silicon Valley for opposing the U.S. military and warned that AI companies risk angering both liberals and conservatives.

“If Silicon Valley thinks we’re going to take away everyone’s white-collar jobs… and you’re going to screw over the military, if you don’t think that will lead to our technology being nationalized, then you’re an idiot,” Karp said. “That’s the direction this road is heading.”

Anthropic plans to take legal action to appease clients

Last Friday, after a dispute with Anthropic over how the military could use its AI, Defense Secretary Pete Hegseth stated that he instructed the government to declare Anthropic a "supply chain risk."

Wall Street Journal mentioned that the Pentagon requires Anthropic to license Claude for "all lawful uses," but Anthropic has refused to compromise due to concerns over "mass surveillance" and "fully autonomous weapons." Former U.S. President Donald Trump posted on Truth Social last Friday that there will be a "six-month phase-out period" for agencies like the Department of Defense using Anthropic products.

Anthropic CEO Dario Amodei argued that the determination "can only extend to the use of Claude as part of a contract with the War Department (the term preferred by the Trump administration for the Department of Defense)." Legal experts stated that Anthropic could fully contest this determination, partly because the law typically applies to non-U.S. companies.

According to media reports citing informed sources, Anthropic also stated last Friday that it would take legal action in court regarding the supply chain risk determination. Since the determination has not yet officially taken effect, Anthropic has not filed a lawsuit.

Anthropic is trying to reassure customers and business partners, stating that the Department of Defense's decision (if implemented) would only limit government contractors' use of Anthropic's technology in U.S. military work, not any company collaborating with the federal government.

Federal Contractors Await Government Guidance

According to media reports citing individuals familiar with Palantir products, Palantir currently allows customers to choose which AI models to use from providers including Anthropic, OpenAI, and Google when analyzing data collected on its platform. The Pentagon has been using Anthropic models hosted by Amazon Web Services (AWS) and working in conjunction with Palantir's software.

Individuals familiar with how the Pentagon uses these products revealed that, in addition to Anthropic models, the Pentagon has also utilized models from OpenAI, Google, and other providers through its Palantir software.

According to employees of tech companies that do business with the government, as of this week, federal contractors are awaiting guidance from the government on how and whether they need to sever ties with Anthropic to retain their federal contracts