Pentagon Gives Anthropic Ultimatum in AI Use Clash

Summary

WSJ What’s News – PM Edition

Episode: Pentagon Gives Anthropic Ultimatum in AI Use Clash

Date: February 24, 2026
Host: Alex Osola
Notable Guests: Robbie Whelan (WSJ, Semiconductors), Rebecca Pichotto (WSJ, Residential Real Estate)

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Episode Overview

This episode centers on major clashes between the Pentagon and AI firm Anthropic over military use of artificial intelligence, as well as significant developments in the AI chip sector with a $100 billion mega-deal between Meta and AMD. The show also addresses ongoing challenges in U.S. housing affordability and new legislative approaches to increasing supply and access, alongside a report on potential new banking requirements tied to immigration policy.

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Key Discussion Points & Insights

1. Pentagon’s Ultimatum to Anthropic on AI Use

• [01:03] Defense Secretary Pete Hegseth met with Anthropic CEO Dario Amodei, delivering an ultimatum: Anthropic must comply by Friday with Pentagon demands on its AI models or risk contract cancellation.
• The Pentagon wants access to Anthropic’s Claude and other AI tools for “all lawful use cases, including domestic surveillance and autonomous lethal activities”—a scope Anthropic resists.
• If Anthropic refuses, the Pentagon threatens to designate the company as a “supply chain risk”—a designation usually reserved for foreign adversary-linked companies—or invoke the Defense Production Act to force compliance.
  • Notable Insight: “Either move would be nearly unprecedented.” (Alex Osola, [01:21])
• The standoff highlights growing tensions as AI becomes critical to national security, with the U.S. military pushing boundaries on usage.

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2. Meta and AMD’s $100 Billion AI Chip Deal

• [02:20] Meta agrees to purchase 6 gigawatts of AI computing power from AMD; the deal could give Meta warrants for up to 10% of AMD stock.
  • Notable Quote: “It might feel sort of circular because it is, but we're still in the stage of the AI boom right now where every one of these big deals is such a big headline. And it's so exciting for investors that investors just bid up the stocks of the companies that are doing them.” (Robbie Whelan, [00:44] & [02:41])
• AMD stock surged 8.8% on the news, while Meta edged up 0.3%.
• Deal Structure:
  • AMD offers Meta warrants on 160 million shares at $0.01/share.
  • Meta gets cheap stock; AMD secures a major customer.
• Concerns: Robbie notes potential “cognitive dissonance”—if AI chip demand is truly insatiable, why “pay” customers to buy?
  • Quote: “If truly there is insatiable demand for AI computing, one would think you wouldn't need to kind of pay these customers… But a lot of the companies in this space are still, for better or for worse, startups.” (Robbie Whelan, [04:00])
• Market Impact: These deals excite investors, pushing up chip company valuations, but contribute to worries about speculative excess—“maybe we're in a bubble?” (Robbie Whelan, [04:44])
• Scale Context:
  • "Six gigawatts is a ton of computing power... many, many football fields worth of data centers." (Robbie Whelan, [05:05])
  • This represents a large chunk—up to five years—of Meta’s AI infrastructure plans.

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3. Market and Corporate Headlines

• [05:42] U.S. stocks rallied, led by Nasdaq (+1%), amid AI momentum and the Meta-AMD news.
• Novo Nordisk to slash U.S. prices for popular drugs (Wegovy, Ozempic) by up to 50%, escalating a price war with Eli Lilly. Despite the move being positioned for consumer access, Novo’s stock closed down 3%.
• Warner Bros Discovery received a revised full buyout offer from Paramount; if accepted, Netflix has matching rights under their agreement.

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4. Trump Administration’s New Banking/Citizenship Proposal

• [07:27] WSJ reports the Trump administration is weighing a requirement for banks to collect citizenship documents (e.g., passports) from all new and existing customers—part of a broader crackdown on illegal immigration.

  • Notable Insight: Discussions have “alarmed banks in recent days” due to the significant regulatory implications.

• Trump’s upcoming State of the Union expected to address economic measures and cost-lowering plans; around 50 Democratic members plan to boycott, holding counter-events in Washington as a protest.

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5. U.S. Housing Affordability Crisis and Legislative Action

• [09:18] Reporter Rebecca Pichotto discusses new bills passed in both the House and Senate targeting supply constraints and affordability.

Key Provisions in Both Bills:

• Incentivizing Cities to Build:
  • Senate bill would revoke/transfer federal grants from cities underperforming in housing production to those over-performing.
• Streamlining Environmental Reviews:
  • Both propose exemptions and process simplification for housing projects—federal adaptation of policies tested by CA and NY.
• Expanding Manufactured/Modular Housing:
  • Amendments to building codes aimed at easing factory-built construction, marketed as faster and cheaper.

Demand-Side Measures:

• Small-Dollar Mortgages:
  • Direct federal agencies to expand access to loans below ~$150,000.
  • Addresses private lender reluctance due to lower profitability.
• Rent-to-Savings Pilots:
  • Allow low-income renters to divert a portion of rent into savings for future down payments or big expenses.

Investor Ban Proposal:

• Trump’s proposal to ban individuals owning over 100 properties from buying single-family homes is not currently included.
  • “[It] did not include the investor ban, despite White House request to do so.” (Rebecca Pichotto, [11:22])
  • The White House is pushing for the amendment in ongoing Senate negotiations.

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Notable Quotes & Memorable Moments

• On the AI Boom:
  “Every time one of these semiconductor companies... sign up a new big customer... their stock just jumps like crazy.”
  — Robbie Whelan, [02:41]

• On the Deal’s Oddities:
  “If truly there is insatiable demand... you wouldn't need to pay customers to incentivize them... it makes people...think, well, if the demand there is not totally organic, then does that mean that we're in a bubble?”
  — Robbie Whelan, [04:00–04:44]

• On Housing Policy:
  "Factory built homes are cheaper and quicker to produce, according to builders. So the House and Senate bills are taking some actions to amend building codes..."
  — Rebecca Pichotto, [09:50]

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Timestamps for Key Segments

• Pentagon-Anthropic AI Ultimatum: [00:57]–[02:20]
• Meta–AMD AI Chip Deal (with Robbie Whelan): [02:20]–[05:37]
• Market/Drug/Media Headlines: [05:42]–[07:27]
• Banking & Immigration Policy: [07:27]–[09:18]
• Housing Crisis Legislation (with Rebecca Pichotto): [09:18]–[11:55]

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Episode Tone & Style

The episode maintains WSJ’s brisk, analytical, and fact-focused tone, punctuated by expert quotes and contextual analysis. Guests provide industry-insider commentary, with a balance of enthusiasm about market developments and caution regarding possible bubbles or unintended consequences of new policy initiatives.

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This summary should provide a clear, comprehensive view of the episode’s major themes, notable moments, and nuanced discussions for listeners and non-listeners alike.

Transcript

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[Alex Osola]

the Pentagon gives Anthropic an ultimatum in their spat over use of the company's AI tools plus US stocks rise after Metta and AMD announced a $100 billion chip deal.

[Robbie Whelan]

It might feel sort of circular because it is, but we're still in the stage of the AI boom right now where every one of these big deals is such a big headline. And it's so exciting for investors that investors just bid up the stocks of the companies that are doing them and

[Alex Osola]

what lawmakers are doing to address the housing affordability crisis. ALEX It's Tuesday, February 24th. I'm Alex Osola 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. A meeting today between Defense Secretary Pete Hegseth and Anthropic CEO Dario Amadei ended in an ultimatum. Anthropic has until Friday to comply with the Pentagon's demands on using its artificial intelligence models or the company's contract will be canceled. That's according to people familiar with the matter. The people said that if Anthropic doesn't show more flexibility working with the military, Hexsep said that he could label the company a supply chain risk, a move typically reserved for overseas companies linked to foreign adversaries. Or, he said, he could invoke the Defense Production act to essentially force the company to work more collaboratively with the Pentagon. Experts have said that either move would be nearly unprecedented. The meeting comes after a recent feud between the Pentagon and Anthropic. Hexeth wants the military to be able to use Anthropic, Claude and other AI tools in all lawful use cases, including domestic surveillance and autonomous lethal activities, a move the company has resisted. In other AI news, Metta has agreed to buy 6 gigawatts worth of artificial intelligence computing power from Advanced Micro Devices. The deal is valued at more than $100 billion and could result in Metta owning as much as 10% of AMD stock price. For more about the deal, I'm joined now by Robbie Whelan, who covers semiconductors for the Journal. Robbie, AMD Stock was up 8.8% today, while Meta's rose just 0.3%. Why are investors betting this is such a big deal for amd?

[Robbie Whelan]

Well, the context here is that AMD is really an upstart when it comes to the chip industry. There's one big dog in this industry that's Nvidia. They control somewhere around 85 or 90% of the market for GPUs, which are the really in demand chips that power AI computing. And what we've seen, especially over the last six months, is that every time one of these semiconductor companies like Nvidia or AMD does a deal where they sign up a new big customer or expand an existing customer relationship, their stock just jumps like crazy. These companies have learned that they can do these kind of novel financing approaches when they do these deals. We've got AMD offering warrants on about 10% of its stock to Meta, 160 million shares of AMD stock. In this case, it's $0.01 per share of stock stock, similar to an option. It's basically a contract that says you're going to get a good deal on our stock. So in other words, Meta is agreeing to buy a ton of chips from amd. AMD is giving Meta money in the form of stock warrants. And it might feel sort of circular because it is, but we're still in the stage of the AI boom right now, where every one of these big deals is such a big headline. And it's so exciting for investors that investors just bid up the stocks of the companies that are doing them.

[Alex Osola]

Are there any downsides to that kind of structure of a deal?

[Robbie Whelan]

Well, there's kind of like a conceptual cognitive dissonance here, which is that if truly there is insatiable demand for AI computing, one would think you wouldn't need to kind of pay these customers to incentivize them to buy your chips. You would think they would just come to you and buy them with cash or with debt. But a lot of the companies in this space are still for better or for worse startups. Not public doesn't have an investment grade credit rating. It's not so easy for them to finance these deals themselves, so they rely on their suppliers to help with the financing. That's great for them, but what it does on the other side of the equation is that it makes people look at these deals in a sort of circumspect way and think, well, if the demand there is not totally organic, then does that mean that we're in a bubble? So every time one of these deals happens, the chip companies prosper and their stocks go up. But it does kind of contribute to this broader sense in the market that maybe, maybe we're moving too fast, maybe we're in a bubble.

[Alex Osola]

Back to the specifics of this deal for a second. I mean, 6 gigawatts worth of AI computing power. That sounds like a lot. Is it?

[Robbie Whelan]

Six gigawatts is a ton of computing power. I mean, we're talking about many, many football fields worth of data centers. Just to sort of put it in context a little bit, Meta has committed to building out tens of gigawatts, 10, 20 or 30, something like that this decade. That's their entire program for building out AI infrastructure. And so 6 gigawatts is a large chunk of that. That's kind of their whole plan for the next four or five years. It's all happening at once right now with amd.

[Alex Osola]

That was WSJ reporter Robbie Whelan. Thanks, Robbie.

[Robbie Whelan]

Thanks for having me, Alex.

[Alex Osola]

US Stocks rose today as news of the Meta AMD chip deal took some of the sting out of a viral AI report that contributed to yesterday's sell off. Major US Indexes were up, with the Nasdaq leading the gains adding about 1%. The Dow and the S&P 500 were both up about 0.8%. In other corporate news, Novo Nordisk says it plans to slash U.S. prices for two of its most popular drugs starting next year. Weight loss and diabetes drugs. Wegovy and Ozempic will have list prices of up to 50% lower than their current prices. The reductions escalate a price war with rival Eli Lilly. The Though Novo says it's making its first ever price cuts to improve patient access and affordability, its stock closed down about 3%. And Warner Brothers Discovery said today that it has received a revised offer from Paramount to buy its entire company, but didn't provide details of what the offer included. Warner said it's reviewing the bid. If Warner accepts the Paramount offer, Netflix has the right to match it under the terms of its agreement with Warner. Coming up, President Trump considers enlisting banks in his crackdown on illegal immigration. That's after the break.

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[Alex Osola]

We're exclusively reporting that the Trump administration is considering requiring banks to collect citizenship information from customers. People familiar with the matter said that the action could task banks with requesting a new category of documents, such as a passport, from both new and existing customers who want to maintain a bank account in the US It's a new front in the administration's crackdown on immigrants living in the US Illegally. And the people said that discussions about the potential executive order have alarmed banks in recent days. This report comes just a few hours before President Trump is expected to make his State of the Union address to a joint session of Congress. As we mentioned on this morning's show, Trump is planning to use the speech to sell the public on the economy, and he's expected to unveil new measures meant to lower costs ahead of the midterms. But one thing you might not see much of is Democrats. About 50 Democratic members of the House and Senate plan to skip the speech, an unusual rebuke of a sitting president. Most of the Democrats protesting will appear instead at dueling counter programming events in Washington that will feature a range of Trump critics. A new report out today showed that US home prices grew 1.3% for the year ending in December, its lowest annual gain since 2011. That's according to the S and P totality case Shiller National Home Price Index, which measures home prices across the country. But that doesn't mean that buyers are finding homes to be more affordable. As mortgage rates and inflation have continued to weigh on buyers recently, though lawmakers have been working on it. The House and Senate recently passed their first significant bills in decades aimed at solving America's housing shortage. Rebecca Pichoto, who covers residential real estate, is here to tell us more. Rebecca, what are some of the major points in both of these bills in both the House and the Senate? Let's start with how they're trying to make it easier to build more homes.

[Rebecca Pichotto]

Yeah, what these bills have in common is they are pushing cities to build more. The Senate bill specifically authorizes a program where certain cities that receive certain federal grant money if they're behind in House housing production, some of that federal funding could be revoked and transferred to cities that are building more. They also are both taking on the federal government's environmental review process. They are offering new exemptions for certain housing projects and overall trying to streamline the process. And this is the federal government's version of what some states have already been pursuing themselves, like California and New York. They are also trying to broaden manufactured and modular housing construction. Factory built homes are cheaper and quicker to produce, according to builders. So the House and Senate bills are taking some actions to amend building codes to make it easier for builders to pursue a factory built construction model.

[Alex Osola]

So it sounds like they're doing a bunch of different things to try to make housing more available. But do these bills include anything that would help people more easily afford buying one?

[Rebecca Pichotto]

Yeah. So both bills are focused primarily on boosting supply, but they do include some demand side levers. Both housing packages direct federal agencies to expand access to small dollar mortgages, generally less than $150,000, though that can vary. Private lenders tend to not pursue small dollar mortgages as much because it can be less profitable. Both bills also are experimenting with a potential pilot program. Certain Low Inc. Would feed a portion of their rent payments into a savings account that could be eventually used for a down payment or some other kind of big life cost.

[Alex Osola]

So of course, it's not just Congress. President Trump has had a few proposals, including barring people who own over 100 properties from buying single family homes. Do these proposals figure into the bills at all?

[Rebecca Pichotto]

They don't. Currently the House passed their bill earlier in February that did not include the investor ban, despite White House request to do so. Now the White House has their eye on this Senate bill which is is currently being renegotiated to add the amendment. Once the Senate passes their version, both the House and Senate will come together and try to reconcile these two packages into one bill, which they will send to the President's desk in hopes of it getting signed into law.

[Alex Osola]

That was WSJ reporter Rebecca Pichotto. Thanks, Rebecca.

[Rebecca Pichotto]

Thanks so much for having me.

[Alex Osola]

And that's what's news for this Tuesday afternoon. Today's show is produced by Pierre Bienname with supervising producer Jana Herron. Alex I'm Alex Osoleff for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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[Miriam Gottfried]

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