OpenAI secures $200m US defence contract to develop ‘frontier’ AI

OpenAI has been awarded a one year, $200 million contract by the U.S. Department of Defense to develop cutting edge AI tools aimed at “critical national security challenges” spanning both warfighting and enterprise domains.

By Saf Malik

• The project, primarily based in and around Washington, D.C., must be completed by July 2026.

• This marks OpenAI’s first direct deal with the Pentagon, having emerged victorious amid a competitive field of 12 bidders.

The news coincides with the launch of its new “OpenAI for Government” initiative.

The company described the venture as follows: “Across these efforts, we’re aiming to improve both the day‑to‑day experience of public service and to help government employees feel more empowered, more efficient, and more supported in their critical missions”.

Additionally, Felipe Millon, OpenAI’s Government go‑to‑market lead— said on LinkedIn: “I’m incredibly proud to share that OpenAI has been awarded a $200 million contract with the U.S. Department of Defense … We’re seeing remarkable momentum in the U.S. government’s adoption of AI, from reducing red tape and administrative burdens to bolstering national security readiness”.

The contract underscores OpenAI’s tidal surge in growth, with the company reporting an annualised revenue run‑rate of $10 billion as of June, alongside plans to raise up to $40 billion via an investment led by SoftBank at a $300 billion valuation.

For context, analysts describe this as one of the largest annual defence contracts ever awarded to a software provider.

Crucially, OpenAI has confirmed that the AI prototypes will adhere to its internal usage policies, which prohibit applications in weapon systems.

While details on the exact AI models remain sparse, the Pentagon’s outline suggests use cases such as enhancing cyber‑defence, streamlining service‑member healthcare, and supporting battlefield logistics and decision‑making.

Industry observers view this contract as a strategic milestone, signalling a shift toward AI‑driven government capabilities—an approach modelled on software‑as‑a‑service and echoing the broader “Stargate” vision for national AI infrastructure.