Microsoft has confirmed it will keep Anthropic’s artificial intelligence technology embedded in its products for commercial customers, excluding the US Department of War, following the Pentagon’s designation of the AI startup as a supply chain risk.

The Windows and Office maker announced on Thursday that its legal team had studied the Pentagon’s designation and concluded that Anthropic products, including the Claude model, can remain available through platforms such as Microsoft 365, GitHub and Microsoft’s AI Foundry for all customers except defence agencies.

“Our lawyers have studied the designation and have concluded that Anthropic products, including Claude, can remain available to our customers, other than the Department of War, through platforms such as M365, GitHub, and Microsoft’s AI Foundry and that we can continue to work with Anthropic on non-defence related projects,” a Microsoft spokesperson said.

Microsoft becomes the first major technology company to publicly commit to maintaining its partnership with Anthropic following the Pentagon’s action. In contrast, several defence technology companies have instructed employees to stop using Anthropic’s Claude models and migrate to alternatives.

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The Department of War formally notified Anthropic on Wednesday that it would label the company a supply chain risk to national security. Defence Secretary Pete Hegseth had announced the move last week, stating that no contractor, supplier or partner doing business with the US military could conduct commercial activity with Anthropic.

The designation followed failed contract negotiations between Anthropic and the Pentagon. Anthropic had sought assurances that its technology would not be used for fully autonomous weapons or domestic mass surveillance of Americans. The Department of War wanted unfettered access to Claude across all lawful purposes without such restrictions.

Anthropic chief executive Dario Amodei said the company had no choice but to challenge the designation in court. “We do not believe this action is legally sound, and we see no choice but to challenge it in court,” Amodei stated in a blog post on Thursday.

Amodei argued that the relevant supply chain law limits the scope of the Pentagon’s designation. He stated that even for Department of War contractors, the supply chain risk designation cannot limit uses of Claude or business relationships with Anthropic if those are unrelated to specific Department of War contracts.

“As we stated last Friday, we do not believe, and have never believed, that it is the role of Anthropic or any private company to be involved in operational decision-making. That is the role of the military,” Amodei wrote.

Microsoft’s position aligns with Anthropic’s interpretation of the designation’s legal boundaries. The company supplies technology to various US government agencies, with Microsoft 365 productivity software widely used inside the Department of War, though those applications will now exclude Anthropic’s models.

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Microsoft integrated Anthropic’s generative AI models into the Microsoft 365 Copilot add-on in September 2025, alongside models from OpenAI. Chief executive Satya Nadella promoted the multi-model approach on social media, highlighting the ability to toggle between Anthropic and OpenAI models in Microsoft 365 Copilot.

In November 2025, Microsoft announced that Anthropic had committed to spending $30 billion on Microsoft’s Azure cloud services, whilst Microsoft agreed to invest up to $5 billion in Anthropic. These figures pale beside Microsoft’s OpenAI partnership, where the company holds a $135 billion stake in OpenAI’s public benefit corporation, and OpenAI has committed to spending $250 billion on Azure.

The Pentagon’s action against Anthropic has triggered significant controversy. On Thursday, 30 former military and intelligence officials and technology policy leaders wrote a joint letter to Congress urging an investigation into what they called a “dangerous precedent” set by the Pentagon’s designation.

Major technology trade groups in Washington have written to the administration warning about negative effects of designating a US company as a supply chain risk. Members of Congress from both parties have criticised the action, with Republican Senator Thom Tillis describing the public fight as “sophomoric” and Democratic Senator Kirsten Gillibrand calling the designation “shortsighted, self-destructive, and a gift to our adversaries.”

The dispute arose after Anthropic signed a $200 million contract with the Department of War in July 2025, becoming the first AI laboratory to integrate its models into classified military networks. As negotiations over ongoing contract terms stalled, rivals OpenAI and Elon Musk’s xAI agreed to deploy their models in classified capacities.

 

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OpenAI chief executive Sam Altman announced his company’s deal with the Department of War hours after Anthropic was blacklisted, stating the agency displayed “deep respect for safety and a desire to partner to achieve the best possible outcome.”

Amodei also apologised for the contents of a leaked internal memo in which he reportedly told staff that one real cause of the dispute was that Anthropic “hasn’t given dictator-style praise to Trump.” The memo was written on Friday, following what Amodei described as “a difficult day for the company” and does not reflect his “careful or considered views.”

Despite the public falling out, Amodei indicated that negotiations have continued between the two sides in recent days. “I would like to reiterate that we had been having productive conversations with the Department of War over the last several days, both about ways we could serve the Department that adhere to our two narrow exceptions, and ways for us to ensure a smooth transition if that is not possible,” he stated.

The case represents an unprecedented action against a US technology company, with supply chain risk designations historically reserved for companies tied to foreign adversaries. The legal challenge promises to test the boundaries of Pentagon authority over commercial AI companies and could establish significant precedents for how military agencies engage with private sector technology providers.

For Microsoft’s commercial customers, Anthropic’s models remain available across enterprise products. For defence contractors and organisations with Pentagon exposure, the designation creates potential compliance uncertainty that legal teams will need to navigate carefully.