# AI Defense Contracts and Market Shifts

**Podcast:** TechCrunch Daily Crunch
**Published:** 2026-03-02

## Transcript

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OpenAI's revealed more details about its agreement with the Pentagon.
I'm Imran Sheikh, and this is a TechCrunch Daily Crunch special.
Anthropics chatbot Claude seems to have benefited from the attention around the company's fraught negotiations with the Pentagon.
As first reported by CNBC, Claude has been rising to the top of the free app rankings in Apple's U.S.
app store.
Well, on Saturday evening, it overtook OpenAI's ChatGPT to claim the number one spot, a position that it still held on Sunday morning.
According to data from Sensor Tower, Claude was just outside the top 100 at the end of January and has spent most of February somewhere in the top 20.
It's climbed rapidly in the past few days, from sixth on Wednesday to fourth on Thursday, then first on Saturday.
A company spokesperson said that daily signups have broken the all-time record every day this week.
Free users have increased more than 60% since January, and paid subscribers have more than doubled this year.
After Anthropic attempted to negotiate for safeguards, preventing the Department of Defense from using its AI models for mass domestic surveillance or fully autonomous weapons, hello Skynet.
Find the latest on this story right now at TechCrunch.com.
All right, by CEO Sam Altman's own admission, OpenAI's deal with the Department of Defense was definitely rushed, and the optics don't look good.
After negotiations between Anthropic and the Pentagon fell through on Friday, President Donald Trump directed federal agencies to stop using Anthropics technology after a six-month transition period.
And Secretary of Defense Pete Hexeth said he was designating the AI company as a supply chain risk.
Well, then OpenAI quickly announced that it had reached a deal of its own for models to be deployed in classified environments, with Anthropic saying it was drawing red lines around the use of its technology in fully autonomous weapons or mass domestic surveillance, and Altman saying OpenAI had the same red lines.
There were some obvious questions.
Was OpenAI being honest about its safeguards?
Why was OpenAI able to reach a deal while Anthropic was not?
As OpenAI executives defended the agreement on social media, the company also published a blog post outlining its approach.
In fact, the most pointed to three areas where it said OpenAI's models cannot be used mass domestic surveillance, autonomous weapon systems, and high-stakes automated decisions, for example, systems such as social credit.
The company said that in contrast to other AI companies that have reduced or removed their safety guardrails and relied primarily on usage policies as their primary safeguards in national security deployments.
OpenAI's agreement protects its red lines through a more expansive, multi-layered approach.
We retain full discretion over our safety stack.
We deploy via cloud, cleared OpenAI personnel are in the loop, and we have strong contractual protections, the blog said.
It continued, this is all in addition to the strong existing protections in U.S.
law.
The company added, We don't know why Anthropic could not reach this deal, and we hope that they and more labs will consider it.
Well, after the post was published, Tech Dirt's Mike Masnik claimed that the deal absolutely does allow for domestic surveillance because it says the collection of private data will comply with Executive Order 1233 along with a number of other laws.
Masnik described that order as how the NSA hides its domestic surveillance by capturing communications by tapping into lines outside the US, even if it contains info from slash on US persons.
In a LinkedIn post, OpenAI's head of national security partnerships, Katrina Mulligan, argued that much of the discussion around the contract language assumes the only thing standing between Americans and the use of AI for mass domestic surveillance and autonomous weapons is a single usage policy provision in a single contract with the Department of War.
That's not how any of this works, Mulligan said, adding, deployment architecture matters more than contract and language.
By limiting our deployment to cloud API, we can ensure that our models cannot be integrated directly into weapon systems, sensors, or other operational hardware.
Altman also fielded questions about the deal on X, where he admitted it had been rushed and resulted in significant backlash against OpenAI.
To the extent that Anthropics Claude overtook OpenAI.
If not, we will continue to be characterized as rushed and uncareful.
We'll see you here tomorrow.
Same tag time, same crunch channel.
And until then, find us at TechCrunch.com.
Hey, Berlin.
Berliner Stadtwerke.
Good for dich.
Good for Berlin.