Anthropic has sued the Department of Defense, following the Pentagon's unprecedented move to designate the company a supply chain risk.

The move came after Anthropic refused to change its terms of service, which prohibit mass surveillance and fully autonomous weapons. Anthropic's CEO, Dario Amodei, also said in internal comments - which he has since walked back - that the company was punished for not donating to Trump or giving "dictator-like praise."

In a filing with the US District Court, Northern District of California, Anthropic called the designation "unlawful." No US company has ever been designated a supply chain risk.

As it stands, Federal agencies and contractors have six months to remove Anthropic products from Department of Defense (DoD) - now stylized as Department of War - contracts.

However, the Trump administration has made it sound like any company that works with the DoD had to cancel any work with Anthropic, while President Donald Trump said that all Federal agencies had to stop Anthropic work.

Anthropic CFO Krishna Rao said that the direct loss of DoD work could cost the company hundreds of millions this year, but added that the confusion and uncertainty caused by the incorrect reading of the designation could cost "multiple billions of dollars."

The designation also risks investor and customer confidence, creating a feedback loop that could make it hard for the company to fund further data center buildout. Anthropic has spent more than $10 billion on model training and inference, and "expects to spend many billions more in the coming years," Rao said.

"If investors opt not to invest in Anthropic in the future, Anthropic will be unable to train the next generation of models, further eroding its commercial position and investor confidence."

Should this continue, it could cause a "ripple effect," which would be "almost impossible to reverse."