Pentagon Awards $200 Million AI Contract to OpenAI for Defense Projects
WASHINGTON, D.C. — The U.S. Department of Defense has signed a $200 million contract with OpenAI to develop advanced artificial intelligence tools aimed at strengthening national security, the Pentagon announced on Monday.
The one-year agreement marks the first formal partnership between OpenAI and the Defense Department, and falls under a new initiative called OpenAI for Government, which will provide AI services and tools tailored to U.S. government agencies.
According to the Defense Department, the contract involves creating “prototype frontier AI capabilities” to address both combat-related and administrative challenges, including cyber defense, military healthcare systems, and defense acquisition processes. The work will primarily take place in the National Capital Region, which includes Washington, D.C., and surrounding areas in Maryland and Virginia.
“This contract… will help the Defense Department identify and prototype how frontier AI can transform its administrative operations,” OpenAI said in a blog post, adding that all applications will remain aligned with its usage policies.
The announcement comes just months after OpenAI revealed a collaboration with defense startup Anduril, which previously secured a $100 million Pentagon contract in December. Rival AI firm Anthropic has also entered the defense space, teaming up with Palantir and Amazon to provide its AI models to military and intelligence agencies.
Speaking at an event in April, OpenAI CEO Sam Altman emphasized the company’s growing role in defense technology.
“We have to and are proud to and really want to engage in national security areas,” Altman said during a conversation with OpenAI board member and former NSA chief Paul Nakasone.
The Pentagon specified that the contract was signed with OpenAI Public Sector LLC, a division created to serve government needs. The deal builds on OpenAI’s recent product for public agencies, ChatGPT Gov, and positions the company as a growing player in the defense tech sector.
Meanwhile, OpenAI is expanding its U.S. infrastructure. In January, Altman appeared alongside President Donald Trump at the White House to announce Stargate, a $500 billion initiative to build advanced AI computing capabilities on U.S. soil.
While the $200 million deal is significant, it represents a small fraction of OpenAI’s booming business. The company is currently generating more than $10 billion in annualized revenue and recently completed a $40 billion funding round, giving it a valuation of $300 billion.
In a related development, Microsoft, OpenAI’s cloud partner, announced in April that its Azure OpenAI service has been cleared by the Defense Information Systems Agency to handle secret-level classified information, further cementing AI’s role in U.S. defense modernization.
