News

OpenAI Lands $200 Million Pentagon Deal to Build AI Tools for National Defense

• By John K. Waters
• 06/17/2025

OpenAI has secured a $200 million contract from the U.S. Department of Defense to build prototype artificial intelligence capabilities aimed at addressing high-priority national security challenges, marking a significant step in the tech company's growing footprint in public sector work.

According to a Pentagon statement released Monday, the one-year agreement tasks OpenAI with developing "frontier AI" systems that will serve both combat and administrative needs. The work will largely be carried out in the Washington, D.C. metropolitan area and is slated for completion by July 2026.

"Under this award, the performer will develop prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains," the Pentagon said.

Frontier AI refers to the most advanced AI models that currently exist. Frontier models are often based on large-scale models trained on diverse datasets. They serve as a base for various downstream applications, and they are intended to push the boundaries of what AI can achieve.

This is OpenAI's first listed contract with the Defense Department and represents a major endorsement of the firm's technological leadership as it scales deployments across both commercial and public-sector markets.

OpenAI for Government Initiative

The agreement is being executed under OpenAI's recently launched "OpenAI for Government" initiative, a framework designed to consolidate its collaborations with government agencies—including partnerships with national laboratories, NASA, the NIH, and the Treasury Department.

In a blog post accompanying the announcement, OpenAI said the new program is intended to "unlock AI solutions that enhance the capabilities of government workers, help them cut down on the red tape and paperwork, and let them do more of what they come to work each day to do: serve the American people."

The contract's use cases will span several domains, from modernizing how service members access healthcare to improving acquisition data processes and reinforcing cybersecurity defenses.

Strategic Growth and National Security Focus

OpenAI's expanding role in defense comes as it seeks to build out its infrastructure and public sector revenue base. The company said last week that its annualized revenue run rate has reached $10 billion, and in March it disclosed plans to raise up to $40 billion in a funding round led by SoftBank at a $300 billion valuation.

Earlier this year, OpenAI partnered with defense tech startup Anduril—recipient of its own $100 million Pentagon contract—to develop AI systems for "national security missions." Anduril is known for applying AI and autonomous systems to battlefield operations and border security.

Sam Altman, OpenAI's CEO, addressed the importance of the defense domain during a public discussion with retired NSA chief Paul Nakasone at Vanderbilt University in April, saying: "We have to and are proud to and really want to engage in national security areas."

Complementing Microsoft, Competing with Rivals

The Department of Defense confirmed the contract is with OpenAI Public Sector LLC, a subsidiary focused on government engagements. This follows Microsoft's April announcement that the Defense Information Systems Agency had approved Azure OpenAI services for use with classified data.

OpenAI's key competitors are also making inroads: Anthropic is collaborating with Palantir and Amazon to bring its AI models into federal intelligence and defense systems.

National AI Policy and Public Sector AI Growth

The Biden administration has encouraged the growth of a competitive American AI ecosystem. In April, the White House's Office of Management and Budget issued updated guidelines promoting AI adoption in civilian federal agencies—although national security and defense agencies were exempt from the mandate.

OpenAI's efforts in Pennsylvania, where state employees used ChatGPT to cut 105 minutes of routine tasks per day, were cited by the company as a case study in how AI can boost productivity in the public sector. Similar implementations are underway at Los Alamos, Lawrence Livermore, and Sandia National Labs.

Despite the scale of the contract, $200 million is a relatively modest portion of OpenAI's broader business—but it signals growing government trust in the company's ability to deliver operational-grade AI at a time when adoption of large language models in defense is accelerating.