ChatGPT maker OpenAI lands $200 million Pentagon deal, makes bold leap into defence tech

OpenAI has secured its first official contract with the U.S. Department of Defense (DoD)—an ambitious $200 million deal under which the AI firm will deliver prototype frontier AI tools to address national security challenges across both military and administrative domains.

The one-year contract, announced Monday by the Pentagon, represents a major step for the Microsoft-backed firm into the defence technology space, underscoring OpenAI’s growing role beyond consumer-facing AI.

What is the contract about?

Under the Chief Digital and Artificial Intelligence Office of the U.S. Department of Defense, OpenAI has been awarded the contract to develop a prototype with frontier AI capabilities “to address critical national security challenges in both warfighting and enterprise domains.”

“The work will be primarily performed in the National Capital Region, with an estimated completion date of July 2026. Fiscal 2025 research, development, test and evaluation funds in the amount of $1,999,998 are being obligated at the time of award,” the department said in its contract order.

The contract was awarded following a competitive bidding process involving 12 offers. It marks a formal expansion of OpenAI’s work with the U.S. government, following earlier partnerships such as its December collaboration with defence tech startup Anduril.

How does OpenAI stack up against its competitors in government tech?

This is not the first time OpenAI has engaged with the U.S. government; however, it marks its first direct foray into defence technology.

In January, CEO Sam Altman joined President Donald Trump at the White House to announce the $500 billion "Stargate" initiative—a sweeping effort to develop domestic AI infrastructure across the United States.

This comes amid a rapidly intensifying race among AI firms to secure public sector contracts. Rivals such as Anthropic have partnered with Amazon Web Services and Palantir to provide their Claude AI models to U.S. intelligence and defence agencies. Palantir, a major incumbent in the defence space, holds an annual DoD AI revenue run rate of about $210 million—comparable in scale to OpenAI’s new deal.

Under its new "OpenAI for Government" initiative, the company aims to streamline public services and national defence functions while adhering to its usage policies. While the specifics of the contract remain largely undisclosed, OpenAI’s deepening integration with the federal government signals a long-term pivot toward public sector engagement.

OpenAI is currently on strong financial footing. As of June, it reported an annualised revenue run rate of $10 billion, driven by surging adoption of its AI products, including ChatGPT. In March, the company revealed plans to raise $40 billion at a $300 billion valuation from SoftBank, underscoring investor confidence.