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Artificial intelligence company Anthropic filed a lawsuit Monday against the administration of Donald Trump, challenging a Pentagon decision that labeled the firm a "supply chain risk."

The company says the move came after it refused to allow its AI technology to be used for surveillance or fully autonomous weapons.

The complaint was filed in the US District Court for the Northern District of California. Anthropic argues that the blacklisting is "unprecedented and unlawful" and is already causing serious financial damage.

"Anthropic's contracts with the federal government are already being canceled. Current and future contracts with private parties are also in doubt, jeopardizing hundreds of millions of dollars in the near-term," the filing states.

The company also said the action threatens its reputation and free speech protections.

The dispute has quickly escalated over the past two weeks. Until recently, Anthropic had worked closely with several US agencies as they adopted advanced artificial intelligence tools.

The company even secured a $200 million contract with the United States Department of Defense in July and became the first AI lab to deploy its technology on the agency's classified networks, NY Post reported.

Last week, the Pentagon officially classified Anthropic as a supply chain risk—an action usually taken against foreign adversaries.

The designation requires defense contractors to certify that they do not use Anthropic's AI models, called Claude, in projects involving the military.

Anthropic Warns Blacklist Could Cost Billions

President Trump also weighed in publicly, directing federal agencies to stop using the company's technology.

"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 on social media.

At the center of the conflict is how Anthropic's AI systems can be used by the government.

According to the lawsuit, the Defense Department wanted full access to the company's AI models for all lawful uses.

Anthropic, however, sought guarantees that its systems would not be used for domestic mass surveillance or autonomous weapons.

Despite the dispute, Anthropic's AI tools have still been used to support US military operations in Iran, according to earlier reports.

Anthropic is asking the court to remove the supply chain risk label and pause the government's action while the case proceeds.

The company has also requested a separate review from the US Court of Appeals for the District of Columbia Circuit.

According to CNBC, Chief Financial Officer Krishna Rao warned that the financial impact could grow quickly. "Across Anthropic's entire business... the government's actions could reduce Anthropic's 2026 revenue by multiple billions of dollars," Rao said.

In a statement, a company spokesperson said, "Seeking judicial review does not change our longstanding commitment to harnessing AI to protect our national security, but this is a necessary step to protect our business, our customers, and our partners."

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Donald Trump, AI