OpenAI just secured a massive win: a U.S. Department of Defense (DoD) contract worth up to $200 million. The aim? To help the Pentagon prototype AI systems using OpenAI’s most advanced models for tasks ranging from admin support to cybersecurity.
In a statement, OpenAI mentioned possible use cases like helping military members navigate healthcare, managing program data, and boosting proactive cyber defense efforts. The company emphasized that all projects under this contract must align with its usage policies and ethical guidelines.
The DoD’s version of the announcement used more direct language, stating that the contract is for “prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains.” It’s unclear if that includes AI being used in actual weapons systems or just support roles like logistics and analysis.
It’s worth noting that although OpenAI’s terms of service once explicitly prohibited any military or warfare applications, that language was removed in January 2024. Still, the company continues to ban individual users from using its tools for weapons development.
With rising concern among Silicon Valley leaders about China’s progress in AI, the DoD’s move isn’t surprising. Just recently, Andreessen Horowitz co-founder Marc Andreessen described the AI race between China and the West as a kind of “cold war” during an episode of “Uncapped,” hosted by Jack Altman—brother to OpenAI CEO Sam Altman.
But beyond national security, this deal also reveals tension between OpenAI and Microsoft, its biggest backer.
Microsoft has been deeply entrenched in government IT for decades. It holds thousands of contracts, many tied to the strict requirements of the DoD, and only in April did it get its Azure OpenAI Service approved for all classified levels.
Now, with the DoD choosing to work directly with OpenAI, it raises eyebrows. It suggests the Pentagon may want access to the tech without Microsoft’s cloud sitting in the middle. From Microsoft’s point of view, that’s likely a tough pill to swallow.
Adding to the intrigue, OpenAI revealed this deal is part of its new “OpenAI for Government” initiative, which rolls together its work with various U.S. agencies—including NASA, NIH, the Treasury, and the Air Force Research Lab.
Neither Microsoft nor OpenAI have commented publicly on how this contract could affect their partnership.
But for now, the takeaway is clear: OpenAI is expanding its influence in Washington—and Microsoft may be feeling the squeeze.
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