Anthropic appeared before a three-judge panel at the D.C. Circuit Court of Appeals on Tuesday to challenge the Pentagon's designation of the artificial intelligence company as a supply chain risk.

The AI firm argued that Defense Secretary Pete Hegseth's supply chain risk label violated federal law, though the company faced skeptical questioning from the three Republican-appointed judges hearing the case. Legal observers described Anthropic as facing an uphill battle in convincing the court to overturn the Pentagon's decision.

Lawyers representing both the Defense Department and Anthropic underwent intense questioning during the hearing as the panel examined the legal basis for the supply chain designation and Anthropic's challenges to it.

The case centers on federal contracting rules that allow government agencies to restrict business relationships with companies deemed to pose supply chain risks. The outcome could affect Anthropic's ability to secure future government contracts and set precedent for how AI companies interact with federal agencies.

Anthropoc, known for developing AI systems including the Claude chatbot, has been seeking to expand its presence in government contracting as competition intensifies among major AI companies for federal business opportunities.