A federal judge has ruled that the US Department of Defense acted unlawfully when it designated the artificial intelligence company Anthropic a supply chain risk, calling the move "illegal and baseless" and a violation of the First Amendment right to free speech. US District Judge Rita Lin found that Defense Secretary Pete Hegseth had overstepped his authority and that invoking national security "is not a blank check to punish and retaliate against government critics."

The dispute began in February, when the Pentagon designated Anthropic — the San Francisco-based company known for its Claude AI models — as a supply chain risk, a legal classification typically reserved for companies based in countries deemed hostile to the United States. It was the first time an American firm had been publicly given such a designation. The Pentagon also ordered companies doing business with the US military to boycott Anthropic. The action followed Anthropic's refusal to allow the military to use its AI models for purposes that included autonomous weapons systems and domestic surveillance, which the company said its models were not reliable enough to support safely and which it regarded as a violation of civil rights.

The White House had previously described Anthropic as "a radical left, woke company" seeking to constrain military activity, while the Pentagon argued that private companies should not be able to place limits on military operations and that Anthropic's refusal to accept new contract terms raised further concerns. Anthropic countered in its lawsuit that the government's actions were "unprecedented and unlawful," and that its business had suffered material harm as a result. Judge Lin had already signalled her scepticism of the government's position in an earlier stage of the case, warning that the administration appeared to be attempting to "cripple" the company and "chill public debate" over the military use of AI.

The ruling arrives amid broader industry anxiety about the risks posed by increasingly capable AI systems. More than 100 organisations, including Anthropic and its rival OpenAI, recently signed an open letter warning that "AI-enabled cyber attacks will become far more widespread and sophisticated" in the coming months and calling for governments and technology companies to urgently strengthen cyber defences through coordinated international action.

In response to the court's ruling, Anthropic said it was focused on "working productively with the government to harness AI for our national security so all Americans benefit from this technology." The Pentagon and the White House had not responded to requests for comment at the time of publication. The case is widely seen as a significant test of the limits of executive power over private technology firms in the rapidly evolving field of artificial intelligence.