OpenAI awarded $200 million US defense contract for the use of its AI models

OpenAI has just launched an initiative called OpenAI For Government starting with a modest new contract. The company was awarded $200 million by the US Department of Defense (DoD) to develop “prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains,” according to the DoD’s website.

The contract is the DoD’s first with OpenAI. It will last a year and take place largely in an area that includes Washington, DC and nearby counties in Maryland and Virginia. The company said its new program will provide federal, state and local governments access to its latest models through ChatGPT Enterprise and ChatGPT Gov, along with custom models for national security on a limited basis.

“This contract, with a $200 million ceiling, will bring OpenAI’s industry-leading expertise to help the Defense Department identify and prototype how frontier AI can transform its administrative operations, from improving how service members and their families get health care, to streamlining how they look at program and acquisition data, to supporting proactive cyber defense,” the company said.

Last last year, OpenAI announced that it was partnering with Palmer Lucky’s defense startup Anduril Industries to develop AI for the Pentagon. The companies said they aimed to combine OpenAI’s models, including GPT-4o, with Anduril’s systems and software to improve the US military’s defenses against unpiloted aerial attacks. However, OpenAI and the DoD didn’t reference Anduril or drone defense in their announcements today.

The contract opens up a new source of revenue for OpenAI. The company recently said that it will increase sales from around $10 billion currently all the way to $125 billion in just four years, without providing many details on how it plans to do that. Currently, OpenAI makes money from ChatGPT for consumers, along with business products and its application programming interface (API). It spends a lot more than it makes, having lost $5 billion in 2024 on around $4 billion in revenue.

In January, OpenAI announced the $500 billion Stargate program to develop additional computing power in the US. The company completed a $40 billion financing round that values it currently at over $300 billion. However, critics have argued that that despite burning enormous amounts of cash on cloud infrastructure, it still has no clear path to profitability. Relations are also reportedly tense with the company’s close partner Microsoft at the moment.