With just days left before Hegseth’s reported deadline for Anthropic to drop its seemingly woke demands for AI safety and guarantees of nonmilitary use, Anthropic told Fortune that it “continued good-faith conversations” with the Pentagon.

Anthropic is facing a deadline of 5:01 p.m. Friday to give the Pentagon unrestricted access to its AI technology or be blacklisted from the military supply chain, Axios reported, as confirmed by the Associated Press.

The standoff follows months of negotiations between the Defense Department and Anthropic over how the military can use the company’s AI. As Axios reported, Hegseth warned Anthropic the Pentagon could label the company a “supply-chain risk,” a designation reserved for foreign adversarial firms, such as the Chinese-based Huawei, if the company doesn’t comply, forcing military contractors to cut ties with Anthropic. He also threatened to invoke the Defense Production Act, a law the Trump administration implemented during the COVID pandemic to encourage companies to expand production of medical supplies, a threat Hegseth reportedly reiterated Tuesday.

An Anthropic spokesperson added that the company would support the government’s functions in line with the company’s principles for responsible AI, saying it will “continue to support the government’s national security mission in line with what our models can reliably and responsibly do.”

The conflict has developed into a proxy war amid a broader debate as to who gets to set the terms on AI use: tech companies or the U.S. government. The Pentagon awarded Anthropic, along with Google, OpenAI, and xAI, contracts worth up to $200 million last year. While up until recently, Anthropic has been the only AI company cleared for use by the Pentagon, the startup has taken a hard-line stance against military applications of its AI, prohibiting its use in fully autonomous weapons and domestic surveillance. But Elon Musk’s xAI this week reached a deal to let the Pentagon use its AI for classified systems, adding competition to Anthropic’s once-exclusive partnership. 

The Pentagon reportedly used Anthropic’s AI model Claude through Anthropic’s partnership with Palantir during the U.S.’s raid in Venezuela, which culminated in the capture of former Venezuelan President Nicolás Maduro. Anthropic then reached out to Palantir, asking how the company’s AI was used during the operation, which Palantir subsequently flagged to the Pentagon, according to The Hill.

Loosening safety commitments

But Anthropic is slowly unraveling its strict commitment to safety. The AI company Tuesday released an updated version of its Responsible Scaling Policy (RSP), originally published in September 2023, to remain competitive, stating the new policy is a reaction to changes in the market environment. “The policy environment has shifted toward prioritizing AI competitiveness and economic growth, while safety-oriented discussions have yet to gain meaningful traction at the federal level,” the Anthropic announcement read.

CEO Dario Amodei has suggested a potential loosening of safety commitments, saying in an interview with podcast host Dwarkesh Patel that the company faces “commercial pressure” and that its strict safety measures have limited its ability to compete with rivals operating under less stringent rules.

In an exclusive interview with Time, Jared Kaplan, Anthropic’s chief science officer, said the changes to the RSP were made out of a concern for safety rather than competition fears. “We felt that it wouldn’t actually help anyone for us to stop training AI models,” Kaplan said. “We didn’t really feel, with the rapid advance of AI, that it made sense for us to make unilateral commitments … if competitors are blazing ahead.”