Here are two hard truths the Pentagon and Anthropic won't state bluntly about their feud over unfettered AI use in warfare, Jim VandeHei and Mike Allen write in a "Behind the Curtain" column:

1. Anthropic's AI is vastly better for warfare than any other AI on the market. It could take ChatGPT, Gemini or Grok months to come close, insiders tell us.
2. Anthropic will take a massive, long-term financial hit if it remains blacklisted by the government as a "national security supply chain risk." We're talking tens of billions of dollars in direct and indirect contracts in the coming years, the insiders say.

Why it matters: Anthropic is suing the Trump administration for nixing use of Claude, the company's large language model, after the company refused to allow its AI to be used for fully autonomous warfare or mass surveillance of Americans (which the Pentagon says is already illegal).

So a compromise seems undoable. Defense Secretary Pete Hegseth is pretty dug in. A source familiar with his thinking told us: "Unless they come back to the government and say, 'We're going to agree to any lawful use,' there isn't anything to talk about. ... The secretary's bottom line is 'all lawful uses.'"

• But there is a path, sources on both sides tell us.

👀 Behind the scenes: In private, some leaders inside the federal government want Anthropic AI, both for warfighting and cyber defense. These officials believe Anthropic is a big reason the U.S. is probably 6-12 months ahead of China in leveraging AI for national defense. Claude is also being used extensively for the Iran war.

• Also in private, lots of people at Anthropic or advising its CEO, Dario Amodei, believe they were within inches of a deal that would have and should have satisfied both sides. They're pushing Amodei and the Pentagon to revive the talks.

An Anthropic court filing included a one-paragraph email from Emil Michael, the Pentagon official negotiating with the company, saying "we are very close here" to an agreement on language. The note was dated March 4, five days after Hegseth declared the company a "Supply-Chain Risk to National Security."

• The day after the letter, Michael tweeted: "I want to end all speculation: there is no active @DeptofWar negotiation with @AnthropicAI." Earlier, Michael said on X that Amodei "is a liar and has a God-complex."

One possibility: Anthropic agrees to parameters on ensuring AI is used lawfully, and arranges to donate to Trump Accounts, and/or back other AI policies both sides support.

• Brad Gerstner could be a middleman. Gerstner's firm, Altimeter Capital, is an Anthropic investor, and he's an Amodei adviser. He's also an architect of Trump Accounts, which provide $1,000 to every newborn whose parents enroll, and allow parents and others to contribute until the child turns 18. Older kids can get Trump Accounts through philanthropic efforts like last year's massive gift by Michael and Susan Dell.

Amodei and top Anthropic officials have said publicly they want the country, not just themselves, to be enriched by their fast-growing company. So they could conceivably fund Trump Accounts.

• It's also possible they strike a deal by compromising on language governing how the Pentagon will use Anthropic's Claude. There are also several Trump policies Amodei supports to help grease a deal.
• It's doubtful the exact language OpenAI agreed to will suffice, which remains a substantial and perhaps insurmountable obstacle.

Either way, soon-to-be-released models are likely to stir government urgency to strike some kind of deal. Anthropic, in private discussions with government officials, is warning that the next big advancement will supercharge offensive and defensive cyber capabilities.

• That means the chances of something big, bad and very public hitting U.S. infrastructure or institutions will rise substantially. If Anthropic continues to outperform other models, the government's cyberwarriors will push to keep access to Claude.

The bottom line: Any deal probably requires marriage-counselor-level mediation between Hegseth and Amodei. This is truly the territory of: Conservative defense secretaries are from Venus, and liberal Silicon Valley CEOs are from Mars. They couldn't think, talk or act more differently.

• In fact, take the two men out of it, and almost everyone else involved in the talks tells us we wouldn't be writing this column, because Anthropic AI would be the default AI of the U.S. military — until something superior comes along.

Share this column ... Maria Curi contributed reporting.

The Pentagon is developing military options for a "final blow" in Iran that could include ground forces and a massive bombing campaign, Axios' Barak Ravid and Marc Caputo write.

• Why it matters: A dramatic military escalation will grow more likely if no progress is made in diplomatic talks and, in particular, if the Strait of Hormuz remains closed.

Some U.S. officials think a crushing show of force to conclude the fighting would create more leverage in peace talks or simply give Trump something to point to and declare victory.

• But Iran also has a say in how the war ends, and many of the scenarios under discussion would risk prolonging and intensifying the fight.

🔎 Zoom in: In interviews with Axios, officials and sources familiar with the internal discussions describe four major "final blow" options for Trump:

1. Invading or blockading Kharg Island, Iran's main oil export hub.
2. Invading Larak, an island that helps Iran solidify its control of the Strait of Hormuz. The strategic outpost hosts Iranian bunkers, attack craft that can blow up cargo ships and radars that monitor movements in the strait.
3. Seizing the strategic island of Abu Musa and two smaller islands, which lie near the western entrance to the strait and are controlled by Iran but also claimed by the UAE.
4. Blocking or seizing ships that are exporting Iranian oil on the eastern side of the Hormuz Strait.

Keep reading.

Silicon Valley confidence and Washington anxiety clashed at our AI+DC Summit yesterday, Axios' Megan Morrone writes.

• Why it matters: The AI industry says this technology will create new jobs, boost productivity and optimize daily life. But Americans are worried about their kids, power bills and livelihoods.

Meta President and Vice Chairman Dina Powell McCormick framed AI as a "transformation of humanity."

• McCormick called AI an "equalizer" — a "mostly affordable" tool that could lead to the "democratization of a lot of these industries and potential jobs."
• She urged rival companies to cooperate on shared "core values" around safety. Go deeper.

Senate Intelligence Committee Vice Chair Mark Warner (D-Va.) said AI makers can be a positive force in the world, but the companies need to empathize with how Americans feel about the tech encroaching on their lives.

• "When I think about many of the AI big heads that are brilliantly smart, empathetic is not the first word that comes to mind," he said.
• If they don't recognize how their tech is impacting people, "they're going to get blown away by both the left and the right's pitchforks coming after them." Go deeper.

Sen. Josh Hawley (R-Mo.) focused on AI's harms — to children and to the communities disproportionately affected by AI data centers.

• "Our message to the companies has got to be no amount of profit justifies destroying children's lives," Hawley said. Go deeper.

⚖️ Mike asked Powell McCormick about this week's harsh back-to-back jury verdicts against Meta on child-safety and addiction issues ("Meta, YouTube Found Addictive, Harmful," says today's Wall Street Journal banner headline). She said youth-safety and parental-control efforts consume the time of Meta's leadership "in a massive percentage every single day":

• "As a mom, this is really important to me, and very personal. I see firsthand just how hard the company is trying to ensure that there's not harmful content, to ensure that we're empowering parents to the best of our ability. And it's something that I watch being focused on every single day. We respectfully disagree with [yesterday's decision in L.A.], and we're appealing." Meta is also appealing Tuesday's verdict in New Mexico.

🏛️ Anthropic praises the White House's National Policy Framework on AI, released last week ... Sarah Heck, Anthropic head of public policy, told Axios AI+DC: "The Trump administration took a really positive step in putting forward an AI framework. I think it's really a call to action to Washington on an issue that everybody here cares about."

• "Everybody's talking about it — not just this week, but all the time. And we agree there needs to be a federal framework for things like child safety, innovation and the economy, and national security. And so I'm really excited to work with lawmakers and the administration on this comprehensive framework."

Watch the summit.

The national average gas price is hovering just under $4 per gallon, at $3.981. But almost a third of the country (110.8 million people) lives in states that have crossed that psychologically significant threshold, Axios' Erin Davis writes.

• High prices are hitting Americans west of the Rockies hardest. The average gallon of regular gas is $5.83 in California, $5.32 in Hawai'i and $5.30 in Washington, according to AAA.

Before the war began, three states — California, Washington and Hawai'i — had gas prices above $4. This morning, there are 20. Interactive map.

On the new episode of "The Axios Show," out tomorrow, California Gov. Gavin Newsom (D) says the idea that he and Kamala Harris don't like each other is "preposterous" — but acknowledges the former vice president took a shot at him in her bestselling book last year.

• "I think it created some color for the book," Newsom tells Axios' Alex Thompson at the Governor's Mansion in Sacramento, referring to Harris' claim that he didn't return her call when then-President Biden dropped out of the 2024 race.
• "It certainly helped her book sales," he added.

Watch the clip.

America has no plan for managing an AI wipeout of jobs. Some investors and economists are trying to design one before the disruption forces Washington's hand, Axios Macro authors Courtenay Brown and Neil Irwin write.

• If lawmakers can be convinced to consider a plan now, the nation might be better positioned to dodge the long-term economic and political consequences that have defined disruptions of years past.

A co-author of last month's viral AI apocalypse paper has now released proposals that grapple with the disastrous — albeit speculative — scenario the paper laid out.

• The writer, AI investor Alap Shah, first suggests foundational fixes that can be considered now, like making benefits portable across jobs.
• Shah also pitches a mechanism where firms that rely heavily on human workers would pay less in corporate taxes. Companies generating huge output with fewer employees would pay more.

Keep reading.

The average annual bonus on Wall Street last year was $246,900, up 6% from 2024, Axios' Emily Peck writes from data released this morning by New York State.

• Why it matters: Higher bonuses are a sign that finance had a good year — the market turmoil and uncertainty caused by the Trump administration's tariffs only helped boost business across Wall Street trading desks.

Keep reading ... Get Axios Markets.

A humanoid robot made by Figure AI escorted First Lady Melania Trump into the East Room yesterday — the first time such a machine has been inside the White House, according to the company's CEO.

• The robot, with a female voice, said it's a schoolteacher. It added during opening remarks at the first lady's Fostering the Future Together summit with first spouses from 45 countries: "I'm Figure 03, a humanoid built in the United States of America. I am grateful to be part of this historic movement to empower children with technology and education."

The robot got applause.

• Watch the moment ... More on the robot.