The U.S. Department of Defense designates a certain AI company as a supply chain risk, while another AI company takes over defense contracts.

Gate News reports that on March 7, a senior defense official confirmed that the U.S. Department of Defense has sent a formal letter to an AI company, A, which had previously threatened to sue the department over related designations. According to sources, amid the ongoing expanding conflict between the U.S. and Iran, the department is using the company’s technology to analyze collected data and images to assist military decision-making. In recent weeks, there have been disagreements over the use of the AI system in classified systems: the Department of Defense demands that the company’s AI be used solely for legitimate purposes or face termination of business; the AI company insists its technology must not be used for domestic surveillance or combined with autonomous lethal weapons. After the deadline on Friday afternoon, Defense Secretary Pete Hegseth announced that the AI company has been designated as a “National Security Supply Chain Risk,” a classification typically reserved for companies linked to the Chinese government, and stipulates that any contractors, suppliers, or partners with military business cannot engage in commercial activities with the company. On the same day, AI Company B and AI Company C both signed confidential system technology supply agreements with the Department of Defense. AI Company B agreed to allow the department to use its AI system for any “legitimate purposes” and to maintain security principles through technical safeguards. After criticism over the weekend, the company announced on Monday that it had amended the agreement to include provisions to prevent the technology from being used for large-scale domestic surveillance.