Anthropic CEO Dario Amodei is back at the negotiating table with the U.S. Department of Defense after the breakdown of talks on Friday over the use of the company’s AI tools by the military, according to The Financial Times. 

Amodei is in talks with Emil Michael, under-secretary of defense for research and engineering, in a last-ditch effort to reach an agreement on the terms governing the Pentagon’s access to Anthropic’s Claude models, the Times reported, citing anonymous sources with knowledge of the matter.

Discussions fell apart Friday, with President Donald Trump directing federal agencies to stop using Anthropic’s tools, and Defense Secretary Pete Hegseth saying he would designate the company a supply-chain risk to national security.

Last week, Michael had attacked Amodei, calling him a “liar” with a “God complex,” in an X post.

Agreeing to a new contract would enable the U.S. military to continue using Anthropic’s technology, which has reportedly been utilized in Washington’s war with Iran. 

Claude became the first major model deployed in the government’s classified networks through a $200 million contract awarded by the DoD to Anthropic, but the company later sought guarantees that its tools would not be used in domestic surveillance or autonomous weapons. The Pentagon had demanded that the military be allowed to employ the technology for any lawful use.

In a Friday memo seen by FT, Amodei reportedly told staff that near the end of negotiations with the Defense Department, it had offered to accept Anthropic’s terms if they deleted a “specific phrase about ‘analysis of bulk acquired data'” — a line he said, “exactly matched this scenario we were most worried about.” 

Amodei also wrote in his note that messaging from the Pentagon and OpenAI, which struck a new deal with the Defense Department on Friday, was “just straight up lies about these issues or tries to confuse them.” 

The timing of OpenAI’s deal with the Pentagon, announced within hours of the White House decrying Anthropic, had caused a public backlash, with Claude seeing a surge of app downloads while ChatGPT reportedly saw app uninstallations surge.

OpenAI CEO Sam Altman later said that his company “shouldn’t have rushed” its deal and outlined revisions to its own safeguards with how the Defense Department can use its technology. 

In a post on X, Altman further addressed the controversy, saying: “In my conversations over the weekend, I reiterated that Anthropic should not be designated as a [supply chain risk], and that we hope the [Department of Defense] offers them the same terms we’ve agreed to.”

Anthropic was founded in 2021 by a group of former OpenAI staff and researchers, who left the firm after disagreements over its direction, with the company marketing itself as a “safety-first” alternative.

Government officials have for months criticized Anthropic for allegedly being overly concerned with AI safety.

A tech industry group, whose members include Nvidia, Google and Anthropic, had sent a letter to Hegseth on Wednesday expressing concern over his designating a U.S. company as a supply-chain risk.

The Defense Department and Anthropic did not immediately respond to a CNBC request for comment on their reported negotiations.

Global defense stocks jumped on Monday as investors reacted to a dramatic military escalation in the Middle East over the weekend.

The sector was a rare bright spot amid a broader market sell-off triggered by fears of a wider regional conflict.

Germany’s Hensoldt and Britain’s BAE Systems were among the top performers in the Stoxx 600, both up around 4%. Defense names Thales, Renk, and Leonardo rose between 4% and 1%, paring earlier gains, while the broader Stoxx 600 index fell more than 1%, touching a two-week low.

Stateside, U.S. firms Lockheed Martin and Northrop Grumman each rose more than 5% in premarket trading. Futures tracking the S&P 500 were down 1.1%.

With South Korean markets closed Monday, regional activity in Asia-Pacific defense sector was somewhat muted. Japan’s defense heavyweights Mitsubishi Heavy Industries and IHI rose about 3% each, while Singapore’s ST Engineering climbed 2.8%.

The moves come after the U.S. and Israel launched widespread attacks on Iran over the weekend that killed Iranian Supreme Leader Ayatollah Ali Khamenei, ending his 36-year rule. Retaliatory strikes by Iran against U.S. bases in the Middle East killed three U.S. service members.

Prospects of an escalation also led oil prices and energy companies’ shares to surge.

“It’s very much one of uncertainty at the moment that investors are grappling with,” said Patrick O’Donnell, Chief Investment Strategist at Omnis Investments.

“Equity markets are a little bit more uncertain about just how long this is going to drag on, for the implication for both growth and inflation that it will have the longer that it goes on,” O’Donnell told CNBC’s “Squawk Box Europe” on Monday.

“Really, it’s a question of… what’s the duration of this conflict?”

The conflict with Iran entered a third day on Monday, with U.S. President Donald Trump warning of further American casualties and saying the conflict could last for up to four weeks. 

In June last year, the U.S. and Israel launched air strikes that damaged three Iranian nuclear sites.

Carl Bildt, former Prime Minister of Sweden and co-chair of ECFR’s Council, said it was expected that Iran would strike back at the American military facilities in the Gulf region, “but now it seems like they are striking other targets across the Gulf as well.”

“That is surprising, but also highly disturbing, because, of course, the stability of the Gulf countries is important to us all, important to the global economy, important to the region,” he said.

President Donald Trump said Friday that he was ordering every U.S. government agency to “immediately cease” using technology from the artificial intelligence company Anthropic.

Trump in a Truth Social post said there would be a six-month phase-out for agencies such as the Defense Department, which “are using Anthropic’s products, at various levels.”

Defense Secretary Pete Hegseth, soon after Trump’s order, said on X that he was ordering the Pentagon to “designate Anthropic a Supply-Chain Risk to National Security” after the AI startup refused to comply with demands about the use of its technology.

Anthropic said in a statement late on Friday that it is “deeply saddened by these developments.” The company said it will challenge any supply chain risk designation in court. 

“We believe this designation would both be legally unsound and set a dangerous precedent for any American company that negotiates with the government,” Anthropic said.

Anthropic, which signed a $200 million contract with the Pentagon in July, wanted assurances that its AI models would not be used for fully autonomous weapons or mass domestic surveillance of Americans.

The Pentagon, which strongly resisted that request, set a deadline of 5:01 p.m. ET Friday for Anthropic to agree to its demands that the U.S. military be allowed to use the technology for all lawful purposes.

That deadline passed without an agreement.

“Anthropic’s stance is fundamentally incompatible with American principles,” Hegseth said in a statement on X.

“Their relationship with the United States Armed Forces and the Federal Government has therefore been permanently altered.”

“Anthropic will continue to provide the Department of War its services for a period of no more than six months to allow for a seamless transition to a better and more patriotic service,” the Defense secretary said. “America’s warfighters will never be held hostage by the ideological whims of Big Tech. This decision is final.”

Trump, in his Truth Social post, wrote, “The Leftwing nut jobs at Anthropic have made a DISASTROUS MISTAKE trying to STRONG-ARM the Department of War, and force them to obey their Terms of Service instead of our Constitution.”

“Their selfishness is putting AMERICAN LIVES at risk, our Troops in danger, and our National Security in JEOPARDY.”

“Therefore, I am directing EVERY Federal Agency in the United States Government to IMMEDIATELY CEASE all use of Anthropic’s technology,” Trump wrote.

“We don’t need it, we don’t want it, and will not do business with them again!”

Sen. Mark Warner, the Virginia Democrat who is vice chair of the Senate Select Committee on Intelligence, condemned Trump’s action.

“The president’s directive to halt the use of a leading American AI company across the federal government, combined with inflammatory rhetoric attacking that company, raises serious concerns about whether national security decisions are being driven by careful analysis or political considerations,” Warner said in a statement.

“President Trump and Secretary Hegseth’s efforts to intimidate and disparage a leading American company — potentially as the pretext to steer contracts to a preferred vendor whose model a number of federal agencies have already identified as a reliability, safety, and security threat — pose an enormous risk to U.S. defense readiness and the willingness of the U.S. private sector and academia to work with the IC [Intelligence Community] and DoD, consistent with their own values and legal ethics,” Warner said.

Elon Musk, the mega-billionaire who had been Trump’s biggest financial backer in the 2024 election, owns xAI, which aims to compete directly with Anthropic and another major AI company, OpenAI.

Musk in recent weeks has repeatedly bashed Anthropic on his social network X, writing on Friday that the company “hates Western civilization.”

Anthropic CEO Dario Amodei said Thursday that his company “cannot in good conscience” allow the Pentagon to use its models without limitation.

In a statement on Thursday, Amodei said, “It is the [Defense] Department’s prerogative to select contractors most aligned with their vision. But given the substantial value that Anthropic’s technology provides to our armed forces, we hope they reconsider.”

“Our strong preference is to continue to serve the Department and our warfighters — with our two requested safeguards in place,” Amodei said.

“Should the Department choose to offboard Anthropic, we will work to enable a smooth transition to another provider, avoiding any disruption to ongoing military planning, operations, or other critical missions. Our models will be available on the expansive terms we have proposed for as long as required.”

On Friday, another major AI company, OpenAI, said it has the same “red lines” as Anthropic regarding the use of its technology by the Pentagon and other customers.

“We have long believed that AI should not be used for mass surveillance or autonomous lethal weapons, and that humans should remain in the loop for high-stakes automated decisions,” Open AI CEO Sam Altman wrote in a memo seen by CNBC.

OpenAI last year signed its own $200 million contract with the Pentagon.

OpenAI’s contract is for AI models in non-classified use cases, which include everyday office tasks.

Anthropic’s contract with the Defense Department included classified work.

The Defense Department had no comment on Friday other than pointing to Trump’s announcement.

Hegseth, in a post on X, included a screengrab of Trump’s post, and cc:ed Anthropic and Amodei with the message, “Thank you for your attention to this matter.”

— CNBC’s Lora Kolodny contributed to this article

President Donald Trump on Friday said that “I’d love not to use” the U.S. military to attack Iran, “but sometimes you have to.”

But Trump also said, “We haven’t made a final decision” on whether to attack Iran.

“We’ll see what happens,” he said. “We’re talking later today. We’ll have some additional talks today.”

Trump’s comment to reporters outside the White House came after he expressed frustration at Iran’s refusal to comply with American demands to curb its nuclear program.

“We’re not thrilled with the way they’re negotiating,” Trump said. “They cannot have nuclear weapons.”

“I’m not happy that they’re not willing to give us what we have to have,” Trump said, referring to that condition.

Asked by a reporter if there could be a long, drawn-out conflict in the Middle East if the United States attacks Iran, Trump said, “I guess you could say there’s always a risk.”

“It’d be wonderful if they negotiate, really, in good conscience, good faith,” he said. “They are not getting there so far.”

Omani Foreign Minister Badr al-Busaidi, who has been mediating negotiations between the U.S. and Iran, met in Washington, D.C., with Vice President JD Vance and other American officials in a bid to avoid war.

A statement issued by Oman’s government after the meeting put a positive spin on those talks that was not reflected in Trump’s blunt comments.

“The meeting examined the indirect US-Iran negotiations sponsored by the Sultanate of Oman, alongside the diplomatic endeavours seeking to culminate in a just and enduring agreement concerning the nuclear file and to guarantee the peaceful character of Iran’s nuclear energy program,” Oman’s government said.

“I am grateful for their engagement and look forward to further and decisive progress in the coming days,” al-Busaidi said in a post on X. “Peace is within our reach.”

During an interview with MS Now, when asked if there was a chance of the United States attacking Iran overnight, al-Busaidi said, “I can’t answer that question, because I don’t know.”

“I think President Trump is sincerely passionate for a deal,” al-Busaidi said. “He wants to have a deal. He wants to have a diplomatic solution, and this is what we are trying to do.”

But Trump, in a speech later Friday afternoon in Corpus Christi, Texas, said of Iran, “We have a very big decision.”

“We have a country that’s been 47 years blowing people’s legs off, arms off,” Trump said. They’ve been knocking out ships, killing people, lots of people, not only Americans, lots of people.”

Trump said he wanted to “make a deal that’s meaningful.”

“I’d rather do it the peaceful way,” Trump said, while calling Iran’s government “very difficult people, dangerous people, very difficult people.”

The U.S. Embassy in Jerusalem earlier Friday authorized non-emergency U.S. government personnel and their family members to leave Israel “due to safety risks.”

Also Friday, the massive American aircraft carrier, the USS Gerald Ford, arrived off Israel’s coast.

Also on Friday, the State Department said that Secretary of State Marco Rubio would visit Israel on Monday and Tuesday to discuss Iran and other regional issues.

Congressional Democrats will force a vote on a war powers resolution relating to Iran next week, Democratic leadership announced Thursday, as President Donald Trump engages in a massive military buildup in the region. The resolution would limit Trump’s ability to conduct military action there.

Reps. Ro Khanna, D-Calif., and Thomas Massie, R-Ky., have introduced a measure known as a war powers resolution that would compel the administration to seek congressional approval before engaging in any further activity in Iran. Congress has the sole authority to declare war under the U.S. Constitution, though that authority has been stretched in recent years by the executive branch.

“As soon as Congress reconvenes next week, we will compel a vote of the full House of Representatives on the bipartisan Khanna-Massie War Powers resolution,” the Democratic leaders led by House Minority Leader Hakeem Jeffries, D-N.Y., said in a statement.

“The Iranian regime is brutal and destabilizing, seen most recently in the killing of thousands of protestors,” the statement read. “However, undertaking a war of choice in the Middle East, without a full understanding of all the attendant risks to our servicemembers and to escalation, is reckless.”

The war powers resolution would also need to be approved by the Senate if it is passed by the House. But passage from the House is far from a guaranteed outcome as bipartisan lawmakers have recently lined up against the resolution.

Reps. Mike Lawler, R-N.Y., and Josh Gottheimer, D-N.J., released a statement last week opposing the measure, citing concerns about Iran’s nuclear and ballistic missile capabilities.

“We respect and defend Congress’s constitutional role in matters of war. Oversight and debate are absolutely vital,” the pair wrote. “However, this resolution would restrict the flexibility needed to respond to real and evolving threats and risks, signaling weakness at a dangerous moment.”

Trump has overseen a massive military buildup in the Middle East and has threatened strikes against Iran. His administration is also negotiating with Tehran over the country’s nuclear program. The two countries held a third round of talks in Geneva on Thursday.

Omani Foreign Minister Badr Albusaidi in a post on X described the day’s negotiations as having made “significant progress.” He said that technical discussions will continue next week in Vienna and that the principals would reconvene “soon after consultation in the respective capitals.”

The president said during his State of the Union address Tuesday that he prefers to resolve the Iran situation diplomatically but did not take military force off the table.

“I will never allow the world’s No. 1 sponsor of terror, which they are by far, to have a nuclear weapon,” Trump said.