Will the Pentagon’s Anthropic controversy scare startups away from defense work?

Source: TechCrunch

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Kirsten

I’m wondering if other startups are starting to look at what’s happened with the federal government—specifically the Pentagon and Anthropic, that debate and wrestling match—and pause about whether they want to be going after federal dollars. Are we going to see a changing of the tune a little bit?

Sean

I wonder about that, too. I think no, at least in the near term, because when you really think about all the different companies—whether they’re startups or more established Fortune 500s—that do work with the government (and in particular with the Department of Defense or the Pentagon), a lot of that work flies under the radar.

General Motors makes defense vehicles for the Army and has done that for a very long time, including electric and autonomous versions. That kind of work happens all the time and never really hits the zeitgeist.

The problem OpenAI and Anthropic ran into last week is that they make products a ton of people use—and, more importantly, no one can shut up about. The spotlight on them naturally highlights their involvement to a level most other contractors don’t face.

The heat around this discussion is specifically about how their technologies are being used—or not used—to kill people. That adds an extra layer of abstraction you don’t get with, say, General Motors as a defense contractor.

I don’t think we’ll see companies like Applied Intuition, which frame themselves as dual‑use, back off much. The spotlight isn’t on them, and there isn’t a shared understanding of the impact in the same way.

Anthony

This story is unique and specific to these companies and personalities in many ways. There have been a lot of interesting thought pieces about the role of technology—and AI—in government, and those are worthwhile questions.

It’s a curious lens, because Anthropic and OpenAI aren’t that different in many respects. Neither is saying, “We don’t want to work with the government,” nor is the other saying, “We’ll work with anyone.” Both publicly want restrictions on how their AI gets used. Anthropic is simply digging in its heels more on the terms.

There’s also a personality layer: the CEO of Anthropic and Emil Michael—who many TechCrunch readers might remember from his Uber days and who is now Chief Technology Officer for the Department of Defense—apparently don’t like each other. Reportedly.

Sean (follow‑up)

Yes, there’s a very big “girls are fighting” element here that we should not overlook.

Kirsten (follow‑up)

Yeah, a little bit. There is, but the implications are a little bit stronger than that. Again, to pull back a little bit…

TechCrunch Event

Pentagon & Anthropic Dispute – Overview

The Pentagon is in a dispute with Anthropic. Although Anthropic appears to have lost the immediate battle, the company’s technology is still widely used by the military and is considered a crucial capability. OpenAI has stepped in, and the situation is still evolving; it will likely change again before this episode airs.

Blowback for OpenAI

• After OpenAI locked in a deal with the Department of Defense, ChatGPT uninstall rates surged by 295 %.
• Source: TechCrunch – “ChatGPT uninstalls surged by 295 % after DoD deal”

Why This Matters

• Noise vs. Core Issue – The uninstall spike is noteworthy, but the real danger lies elsewhere.
• The Pentagon is seeking to amend the terms of an existing contract with a startup.
• This move is unusual: government contracts typically take a long time to negotiate, and changing terms after they’re signed signals a shift in the political‑military landscape.

Takeaway for Startups

• Any startup working with the Department of Defense should pause and reassess.
• The current political environment around DoD contracts appears different from the norm, and the willingness to renegotiate existing agreements could pose significant risks.

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