Trump Directs the Government to Stop Using Anthropic’s AI

0:00Alex Ossola:Boardrooms love buzzwords. AI, climate, resilience.

0:03Amrith Ramkumar:But what do they actually mean for CFOs and execs trying to survive the next earnings call? That's where the pre-read comes in. Real experts and real talk.

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0:18Alex Ossola:The U.S. is intensifying its military preparations in the Middle East for a possible attack on Iran. Plus, Bill Clinton tells Congress that he had no idea about Jeffrey Epstein's crimes. And Trump says he's ending the government's use of Anthropic's AI. The administration's fight with Anthropic could have big national security implications.

0:38Amrith Ramkumar:This is 100 percent about who controls how AI is used in the military. So those stakes are enormous because that's going to be a topic that comes up again and again in the coming years and decades.

0:48Alex Ossola:It's Friday, February 27th. I'm Alex Osilev for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:04The U.S.

1:05Alex Ossola:is gearing up for a possible war with Iran. The aircraft carrier USS Gerald R. Ford is approaching the Middle East today, adding a second carrier to the Armada of American naval and air power already in the region. Talks between American and Iranian negotiators concluded yesterday with no deal on Tehran's nuclear and missile programs. The U.S. is pulling non-essential staff from two of its embassies in the Middle East to prepare for possible counter-strikes from Iran. Speaking to reporters today, President Trump said the U.S. and Iran weren't close to an agreement.

1:35Amrith Ramkumar:Well, we haven't made a final decision. We're not exactly happy with the way they're negotiating. They cannot have nuclear weapons. We're not thrilled with the way they're negotiating, so we'll see how it all works.

1:48Alex Ossola:It's not clear when any attack would take place. Iranian and U.S. officials are supposed to meet in Vienna on Monday for talks. And in Chappaqua, New York, Bill Clinton testified today before the House Oversight Committee, the first time a former U.S. president appeared before a congressional committee under subpoena. Hillary Clinton testified yesterday. According to his prepared opening remarks for today's closed-door session, Bill Clinton said he had no idea about Jeffrey Epstein's crimes. He also said that he was likely not to recall certain details and that he wouldn't lie under oath about events from two decades earlier.

2:22Alex Ossola:Representative Robert Garcia, a Democrat from California and the committee's ranking member, said Clinton was cooperative in his testimony.

2:29Amrith Ramkumar:He's actually answering the questions fairly, to the best of his ability. He has not taken a pass on pleading the fifth for any questions.

2:38Alex Ossola:He's been very thorough. But Democrats also say Trump should testify too.

2:42Amrith Ramkumar:We are now asking and demanding that President Trump officially come in and testify in front of the Oversight Committee. He appears in the Epstein files next to Jeffrey Epstein and Ghislaine Maxwell almost more than anybody else.

2:59Alex Ossola:Representative James Comer, the Republican chair of the committee, said Trump has already answered questions about Epstein multiple times. Trump today said that he didn't like seeing Clinton deposed, but that, quote, they certainly went after me a lot more than that. The three major U.S. indexes fell today. The Dow had the biggest loss, closing down 1.1%. The KBW Nasdaq Bank Index fell 4.9%, its largest one-day drop since market turmoil last April related to tariffs. The country's largest banks tend to be a proxy for investors' beliefs about the economy. Journal-Markets reporter Jack Pitcher says the reasons stocks dropped today aren't new.

3:38Amrith Ramkumar:We saw tech and financials weighing on the stock indexes, which extended some storylines we've seen come up throughout the month. When it comes to tech stocks, people are trying to figure out how some of the rapid AI developments we're seeing are going to impact different business models. Meanwhile, in financials, there's been a lot of concerns about private credit and whether there's maybe some more risk in the system than people realized.

4:01Alex Ossola:For the month, the Nasdaq fell 3.4 percent, while the S &P finished down 0.9 percent, both the sharpest losses since March 2025. The Dow ended up 0.2 % in February, its 10th straight winning month.

4:18Alex Ossola:Bloomingdale's doesn't seem like a retailer that should be succeeding right now. Rivals like Sachs and Lord & Taylor have filed for bankruptcy or gone out of business. But Bloomingdale's is thriving. It's posted five straight quarters of sales gains, and analysts expect that trend to continue. Suzanne Kapner covers retail for the Journal. Suzanne, why is Bloomingdale's doing so well when so many rivals have failed? Well, the answer is really twofold. One, it is actually because rivals are failing that is giving Bloomingdale's an edge to win over consumers and brands. When Saks and its sister companies, Neiman Marcus and Bergdorf Goodman, filed for bankruptcy in January, that really opened up a lot of business that Bloomingdale's has been able to take advantage of.

5:02Alex Ossola:But it goes beyond that. They have laid in place a strategy to elevate Bloomingdale's, to rejuvenate it, to make it the exciting place to shop that it was during its heyday in the 1970s and 80s. And that includes renovating stores, adding new luxury brands like Christian Louboutin, and doing more immersive marketing events to make the shopping experience more like theater. Selling luxury brands is a key part of this strategy. But you write in your story that a decade ago, many of those luxury brands wouldn't sell to Bloomingdale's. Why has that changed? Well, in part because of the troubles at Saks, Neiman Marcus and Bergdorf Goodman.

5:42Alex Ossola:Those chains are sort of the true pinnacle of luxury department store retailing in the U.S. So if they're already selling in Saks and Neiman Marcus, they probably don't need to be in Bloomingdale's. But now the dynamics have shifted and brands are a little more open to looking at alternative venues to distribute their products. And Bloomingdale's has really risen to the occasion. They are discounting less. They are giving the brands more freedom to express their vision in in-store shops. They're sharing more data with the brands to try to create a true partnership. That was WSJ reporter Suzanne Kaffner.

6:17Alex Ossola:Thanks, Suzanne. Thank you. Coming up, who decides what the military can do with AI? The fight has already begun. That's after the break.

6:49Amrith Ramkumar:Thank you.

7:04Alex Ossola:President Trump has capped off weeks of tension between the Pentagon and Anthropic. He posted on Truth Social late this afternoon that he was ordering every federal agency in the United States government to stop using Anthropic's technology. He says the Department of Defense and other agencies using Anthropic's clawed models will have a six-month phase-out period. He said there would be civil and criminal consequences if the company was not helpful during the transition. Anthropic said earlier that it wouldn't back down from its guardrails around the military's use of Claude. Trump's announcement appears to indicate that the administration is canceling Anthropic's contract with the Pentagon, which is worth up to$200 million.

7:42Alex Ossola:Anthropic didn't immediately respond to a request for comment. I spoke earlier today with WSJ tech policy reporter Amrith Ramkumar. Amrith, let's start with some basics here. What does the Defense Department use AI for?

7:55Amrith Ramkumar:The military is using AI in as many ways as it can. A few weeks ago, we broke the news that Claude was used in the Venezuela operation to capture former President Nicolas Maduro. And that was one of the first times that a lot of the public really saw that, wow, these tools are being used. It can be like summarizing documents. It could be back office functions. But you can also imagine a world where AI is controlling drone swarms. So the military is keeping its options open, essentially, and saying we need this technology to be used in all lawful use cases as we see fit.

8:27Alex Ossola:And walk us through this dispute Anthropic is having with the Defense Department.

8:32Amrith Ramkumar:The military is somewhat dependent on Claude because it has been the only classified model available for many months now. So the military recently approved Elon Musk's Grock for those scenarios, but it would take many months to rip out Claude and substitute Grock. And there are many things that Claude is better at than Grock. So on Tuesday, Pete Hegseth, the Defense Secretary, essentially threatened the Anthropic CEO. He gave them until 5.01 p.m. on Friday to do what the department wants.

9:01Alex Ossola:A group of senators focused on defense have asked the two sides to reach a compromise. But what is it that Anthropic doesn't want Claude used for?

9:09Amrith Ramkumar:Anthropic's red lines that it's very clear about are that its technology can't be used in fully autonomous weapons without a human in the loop or for domestic mass surveillance. Those are the two guardrails they want written in and codified in their contract with the Department of Defense. The department is essentially saying, just agree to let us do all lawful things and we'll take care of your red lines and we'll abide by them. So in some ways, both sides are talking past each other. And we now know that OpenAI and Sam Altman, they've made clear that they want to maintain some of the same red lines.

9:42Alex Ossola:Right. Altman said that OpenAI was working on a possible deal with the Pentagon which could help solve the impasse with Anthropic. Here's what he said about the situation this morning on CNBC.

9:51Amrith Ramkumar:Companies that choose to work with the Pentagon, as long as it is going to comply with legal protections and the sort of the few red lines that the field we have, I think we share with Anthropic and that other companies also independently agree with. I think it is important to do that. I've been for all the differences I have with Anthropic. I mostly trust them as a company and I think they really do care about safety. And I've been happy that they've been supporting our warfighters. I'm not sure where this is going to go.

10:21Alex Ossola:Amrith, there have been tensions between the Trump administration and Anthropic for a while, right?

10:25Amrith Ramkumar:A lot of this is about vibes. Anthropic is seen as the woke AI company. They've criticized the administration for giving AI chips to China. They have these ties to organizations that are big donors to democratic causes. They're putting their own money into this organization that's essentially fighting most of the AI industry ahead of the midterm elections to support regulation of AI. So that broader context has a lot to do with this.

10:51Alex Ossola:You mentioned the Pentagon has also approved XII's Grok tool for use in classified information recently, but you've reported that some government officials are warning against that use. Why is that?

11:02Amrith Ramkumar:Over the last few years, officials within the GSA, the procurement arm of the federal government, they've raised concerns about Grok. We've even seen some officials within the National Security Agency said it's not as reliable if you test it in certain scenarios. When you're talking about a military context or a high-stakes government usage context, that reliability matters a lot. So officials have raised those concerns, but the government has said they're comfortable with where Barack is now. And again, Elon Musk's relationship with the Trump administration and the Pentagon has a lot to do with this.

11:35Amrith Ramkumar:He's willing to work with the military on AI usage, and he's willing to take a looser approach than a lot of the other companies. So that definitely gave them a leg up.

11:43Alex Ossola:And we should note that Musk and XAI didn't respond to requests for comment. That was WSJ Tech Policy reporter Amrith Ramkumar. Thanks, Amrith.

11:52Amrith Ramkumar:Thanks for having me.

11:53Alex Ossola:In other AI news, OpenAI says it's raised$110 billion in new funding. The financing includes$30 billion from SoftBank, a$50 billion commitment from Amazon, and$30 billion from NVIDIA. The deal values the company at$730 billion before the investment. It suggests that investor interest remains strong in the ChatGPT developer, which is expected to go public later this year.

12:23Alex Ossola:And finally, scientists know that our human ancestors interbred with Neanderthals, who thrived across Europe and Western Asia before going extinct thousands of years ago. Now, new research gives us more detail about those sexual encounters. A study published yesterday says most of them were between male Neanderthals and female humans. The researchers figured this out by comparing the DNA from 73 modern women in Africa to genetic information from three female Neanderthals. And that's What's News for this week. Tomorrow you can look out for our weekly markets wrap-up, What's News in Markets? Then on Sunday we've got an episode of our USA 250 series about the history and future of retirement in the U.S.