Good morning. AI startup Anthropic is at odds with the U.S. Department of Defense, and the dispute could complicate the company’s path toward a blockbuster IPO and large enterprise deals.
Anthropic develops advanced AI systems, including its Claude language models, with a focus on safety and reliability. The company recently raised $30 billion in a Series G round, valuing it at roughly $380 billion, making it one of the largest private tech fundraises ever. Expectations have been building that an IPO could come as early as 2026.
The current flashpoint is a roughly $200 million Pentagon contract. Anthropic sought explicit contractual restrictions to prevent its AI from being used for mass domestic surveillance or fully autonomous weapons. The Pentagon, in contrast, insisted it must be able to deploy contractor technology for any lawful purpose.
Negotiations broke down, the Department of Defense moved to terminate the contract, and it designated Anthropic a “supply chain risk,” effectively restricting many government agencies and defense contractors from working with the company. You can read more of Fortune’s coverage here.
“They just touched the third rail with this,” Wedbush analyst Dan Ives said of Anthropic. “For Anthropic, enterprises now put pencils down on projects because they are a supply chain risk as seen by the government,” Ives told me during our conversation. “This is a nightmare situation for Anthropic.”
Ives acknowledged Anthropic’s passionate stance while also addressing investor concerns. “I think the worry for investors and the industry is the unintended consequences,” he said. “I believe there potentially could be more fallout from this. Being on the wrong side of the White House and the Pentagon is not a good thing.”
The standoff could also complicate the role of CFO Krishna Rao, who joined Anthropic in 2024 and would likely lead any IPO. Rao formerly worked at Airbnb in roles including global head of corporate and business development and leader of corporate and operations FP&A, helping guide the company through major equity and debt raises, including its IPO. He also previously served as CFO at Fanatics Commerce. But navigating tensions with Washington could prove far more complex than raising capital.
The Anthropic dispute stands in stark contrast to OpenAI, which recently struck a deal allowing the Pentagon to use its models in classified systems. But this move is raising more questions about AI. Read more here.
For Anthropic, the stakes are high as the debate over AI continues.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Sonalee Parekh was appointed CFO of SentinelOne (NYSE: S), a cybersecurity company, effective March 24. Barry Padgett will continue to serve as interim CFO until Parekh’s start date. She brings more than 25 years of experience. Parekh most recently served as CFO of Asana. Previously, she served as CFO of RingCentral. She also held senior finance leadership roles at Hewlett Packard Enterprise, including divisional CFO and head of corporate development and investor relations.
Aziz Megji was promoted to CFO at Asana, Inc. (NYSE: ASAN), a work management platform, effective March 24. Megji will succeed Sonalee Parekh, who has served as Asana’s CFO since 2024 and tendered her resignation effective March 23. Megji brings his experience from his head of financial planning and analysis role. Before joining Asana in 2024, Megji held senior finance leadership roles at RingCentral, Nvidia, and Hewlett Packard Enterprise.
Big Deal
The February ADP National Employment Report finds that private-sector employment increased by 63,000 jobs in February and pay was up 4.5% year over year.
“We’ve seen an increase in hiring and pay gains remain solid, especially for job stayers,” Nela Richardson, chief economist at ADP, said in a statement. “But with hiring concentrated in only a few sectors, our data shows no widespread pay benefit from changing jobs. In fact, the pay premium for switching employers hit a record low in February.”
Education and health services added 58,000 jobs, the largest gain of any industry sector and a key driver of overall job growth, according to the report. In contrast, professional and business services had the largest job losses, shedding 30,000 positions, more than any other major sector listed.
The ADP National Employment Report is an independent measure of the labor market based on the anonymized weekly payroll data of more than 26 million private-sector employees in the U.S. The Bureau of Labor Statistics’ Employment Situation report for February is scheduled to be released on Friday.
Going deeper
“Warren Buffett complained for decades that boosting profits by excluding exec stock comp was ‘cynical.’ Nvidia just surprised Wall Street and agreed” is a Fortune article by Amanda Gerut.
“Tucked neatly inside the investor materials Nvidia produced last week to show its record full fiscal year 2026 revenues of $215.9 billion and a fourth-quarter revenue beat of $68.1 billion were a few lines in the chief financial officer’s commentary that caught even some close observers of the company by surprise.” Read more here.
Overheard
“Returns on job experience are increasing in AI-exposed occupations.”
—J. Scott Davis, Dallas Fed assistant vice president, writes in new research, Fortune reported. “Young workers with primarily codifiable knowledge and limited experience will likely face challenging job markets,” according to Davis. Entry-level workers mostly bring classroom knowledge that AI can easily automate, Davis explains. In contrast, older workers draw on experience-based judgment, which is much harder for AI to replicate.
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