The US Department of Defense has awarded contracts worth up to $200 million to Anthropic, Google, OpenAI and xAI to develop AI solutions for security. This is stated in a press release.
The department’s digital and AI directorate said the funds will accelerate the insertion of frontier capabilities into national-security tools. The companies will develop agentic systems for the Pentagon’s various lines of effort.
“The implementation of artificial intelligence is changing our ability to support the military and preserves a strategic advantage over adversaries,” said the Department of Defense’s chief digital and AI officer, Doug Matty.
In parallel, Elon Musk’s xAI unveiled Grok for Government—a suite that makes the startup’s models available to US public-sector customers. Distributed via the General Services Administration platform, it allows federal bodies, agencies and departments to procure tools directly.
Announcing Grok for Government — a suite of products that make our frontier models available to United States Government customers
We are especially excited about two new partnerships for our US Government partners
1) a new contract from the US Department of Defense
2) our…— xAI (@xai) July 14, 2025
In 2024 OpenAI received a one-year, $200 million Pentagon contract—shortly after the announcement of a partnership with defence startup Anduril to deploy AI systems in missions tied to national security.
AI in the military
In March, it emerged that the US Department of Defense will use AI agents to simulate confrontations with foreign adversaries.
Over the past two years the Pentagon has been pushing AI across numerous projects. Reports indicate it is overseeing 685 initiatives. The aim is to boost “decisive superiority” through rapid data analysis and decision support on the battlefield.
Main defence use-cases include:
- drones and autonomous systems. AI is widely used in reconnaissance drones and strike UAVs, as well as in counter-drone operations. Swarming is advancing. In 2023, startup Shield AI demonstrated autonomous teaming of three V-BAT aircraft under the Hivemind AI pilot, under a US Air Force contract. In parallel, the Replicator initiative, announced by deputy defence secretary Kathleen Hicks, is aimed at rapidly fielding thousands of autonomous systems to blunt adversaries’ numerical advantages;
- intelligent agents and decision support. The Pentagon is experimenting with agentic AI systems that can autonomously handle routine tasks and assist military personnel. In 2023 it created Task Force Lima to study generative AI; by late 2024 this evolved into a permanent AI Rapid Capabilities Cell, with about $100 million for pilot projects;
- intelligence analysis and targeting. AI is increasingly used to process large volumes of intelligence—satellite and drone imagery, signals intercepts and text—to identify targets and valuable information more quickly. An early effort was Project Maven, where computer-vision algorithms helped analyse drone video. These tools are now scaling: in 2023 Palantir won a $480 million contract for the Maven Smart System, which will give combat teams expanded access to integrated intelligence data and AI tools to improve situational awareness and weapons guidance. Palantir is also developing TITAN for the Army—a mobile reconnaissance-strike centre billed as “the first platform defined by AI.” The contract is worth $178 million;
- cyber defence and information security are also proving test beds for AI. The US Department of Defense uses algorithms to analyse network traffic, detect anomalies and spot emerging threats. Generative models are used to simulate attacks and test defensive mechanisms.
To create and deliver military AI, the Department of Defense draws on both big tech and defence startups. Over the past two years, several high‑tech companies have signed large agreements with the Pentagon:
- OpenAI;
- Anthropic;
- xAI;
- Google;
- Microsoft;
- Palantir;
- Anduril Industries;
- Shield AI.
Contracts, budgets and investment
Funding for artificial intelligence in America’s defence budget is rising rapidly. According to open data, the Department of Defense’s FY2024 request included about $1.8 billion for AI‑related programmes—$600 million more than the previous year. The money is slated for “responsible AI,” workforce development and modernising data infrastructure across the Pentagon.
In 2024–2025 the department shifted emphasis from pure budget growth to partnerships with the private sector, outsourcing many developments to external companies. Even so, AI remains a critical axis of US military superiority.
America’s investment in military AI includes not only direct appropriations but also venture capital and private development spurred by public demand. As noted, defence startups with billion‑dollar valuations are on the rise (Anduril—over $8 billion, Shield AI—$2 billion, etc.).
The AI arms race: US versus China
The US is effectively in an AI‑weapons race with China, seeking technological supremacy. Both acknowledge that AI can radically change the character of war and are investing heavily in military applications.
China has officially declared a goal of creating “world‑class armed forces” by mid‑century through comprehensive “intelligentisation” of the military—deep integration of AI and advanced technology at every level of the PLA.
Beijing is amping up its policy of “military‑civil fusion,” drawing on the capabilities of its tech giants for defence programmes, and sees this as an edge over America’s more separated model.
China is investing actively in AI: by expert estimates, some 1–2% of its defence budget goes to this area. In the US the share is about 0.1–0.2%. Despite the smaller overall budget, China in absolute terms spends several times more than the US on military AI research and deployment.
In January, Donald Trump announced $500 billion in private‑sector investment in AI infrastructure.
China views AI as a key factor in future conflicts and aims to shift to “intelligentised” warfare. DeepSeek and other national firms are aiding that push.