Written by: Bao Yilong, Wall Street Watch
OpenAI enters the military-industrial market, the AI arms race behind the $200 million military contract.
On June 16, the U.S. Pentagon announced it will sign a $200 million defense contract with OpenAI to develop artificial intelligence tools to address critical national security challenges. The Pentagon stated in the announcement:
Under this project, the contractor will develop cutting-edge AI prototype capabilities to address critical national security challenges in the military and corporate sectors.
This is the first contract listed by OpenAI on the Department of Defense website, with work primarily taking place in the Washington area and expected to be completed by July 2026. OpenAI stated that the plan will provide customized AI models, technical support, and product roadmap information to U.S. government agencies.
According to media reports, although OpenAI emphasized in the official blog post that the primary application scenarios of the contract will focus on improving military healthcare, streamlining project procurement data analysis, and proactive cyber defense in administrative areas, and promised that 'all use cases must comply with OpenAI's usage policies and guidelines,' the wording in the Pentagon's statement regarding 'warfighting domains' leaves significant room for market imagination.
To systematically advance such cooperation, OpenAI announced the establishment of a new department called 'OpenAI for Government,' and this Department of Defense contract is the inaugural project of this plan.
Arms Race: AI Giants Compete for the Defense Pie
OpenAI's actions are not isolated events.
Just last December, OpenAI announced a partnership with defense technology startup Anduril to deploy advanced AI systems for 'national security missions,' while Anduril itself secured a $100 million defense contract in the same month.
The smoke of competition is also present in the rivals' camp. OpenAI's main competitor Anthropic announced earlier that it would collaborate with big data companies Palantir and Amazon to provide its AI models to U.S. defense and intelligence agencies.
Meanwhile, as OpenAI's most critical infrastructure partner, Microsoft's Azure OpenAI service received authorization from the U.S. Defense Information Systems Agency in April this year to handle classified information at the 'secret' level. This paves the way for OpenAI's technology to enter more sensitive defense areas.
From a purely financial perspective, this $200 million may be just a drop in the bucket for OpenAI.
According to the latest data, as of June this year, the company's annualized revenue has surged to $10 billion. In March this year, the company sought up to $40 billion in a financing round led by SoftBank, with a valuation targeting $300 billion. Additionally, the 'Stargate' project, announced alongside President Trump, aimed at building the AI infrastructure in the United States, has an investment scale of up to $500 billion.
However, the symbolic significance of this Pentagon contract far exceeds its monetary value. Analysts believe it not only opens a brand new revenue source for OpenAI that is almost unaffected by economic cycles but, more importantly, it signifies OpenAI's formal entry into this arms race.