OpenAI bags $200 million Pentagon contract to build AI tools for US military

ChatGPT-maker OpenAI has landed a $200 million contract from the United States Department of Defenseto develop cutting-edge artificial intelligence tools for military applications, the Pentagon confirmed on Monday.

It is the company’s most high-profile defence contract to date, placing OpenAI, originally a consumer-facing tech firm, at the heart of America’s military–AI transformation.

“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 stated.

The work will be carried out primarily in and around Washington, with an estimated completion date of July 2026.

Why it matters

The deal underscores Washington’s push to harness frontier AI systems for battlefield readiness, faster intelligence synthesis, and advanced decision-making, as strategic rivalries with China and Russia intensify.

It also marks OpenAI’s formal entry into the defence establishment, a major evolution for a company better known for revolutionising education and corporate workflows with tools like ChatGPT and Codex.

As of March 2025, OpenAI had 500 million weekly active users. The company said this month that its annualised revenue run rate had surged to $10 billion, on track to meet its 2025 targets amid soaring global AI adoption.

Defence AI gets a Silicon Valley upgrade

The contract follows guidance issued by the White House’s Office of Management and Budget (OMB) in April, encouraging federal agencies to foster a competitive American AI sector. National security and defence systems were explicitly exempted from the tighter AI oversight — allowing agencies like the Pentagon to move quickly.

That exemption is now being leveraged to formalise OpenAI’s military partnership.

Reuters has reported that OpenAI is in talks to raise as much as $40 billion in a new funding round led by Japan’s SoftBank, at a $300 billion valuation — underlining investor confidence in its long-term strategic relevance.

The bigger picture

The US military has long experimented with AI through its research arm, DARPA. But this new agreement represents a turning point — where private AI leaders are brought directly into core national security missions.

While technical specifics remain classified, the AI tools are expected to support capabilities such as autonomous decision-making, threat detection, secure communications, and multilingual data analysis.

The move is likely to be watched closely in Beijing and Moscow, both of whom have ramped up investments in military-grade AI.

The Pentagon’s new AI contract is not just about innovation, it’s about preserving a strategic edge in what many now call the AI arms race.

(With inputs from the agencies)