Google Gemini Pentagon Deal: The End of Tech Neutrality in the AI Arms Race?

TradingKey - According to reports from The Information, Google (GOOG) (GOOGL) has signed an agreement with the U.S. Department of Defense, allowing the Pentagon to use Google AI for 'any lawful government purpose.' This marks Google joining OpenAI and Elon Musk's xAI as technology companies that have entered into classified AI usage agreements with the Pentagon.

The agreement requires Google to assist in adjusting its AI safety settings and filters based on government requests, and the flexibility of this provision is reportedly greater than that of the agreement reached between OpenAI and the Pentagon in February.

Google’s Military Pivot: From Project Maven to Classified Pentagon Contracts

Google's signing of this agreement marks a major shift in its relationship with the U.S. military. In 2018, Google employees successfully pressured the company to abandon the Department of Defense's Project Maven, an initiative designed to integrate AI into drone warfare.

However, following its business transformation in recent years, Google seeks to rebuild its military division, not only gradually repairing its relationship with the government but also competing with Amazon (AMZN) AWS and Microsoft (MSFT) for defense cloud contracts. Prior to signing this deal, Google had already entered into an AI collaboration agreement with the DoD for unclassified uses as early as 2024.

In addition, Google is refining its AI usage principles to pave the way for government contracts. In early 2025, Google removed provisions that explicitly barred the use of AI for weaponry and surveillance, a move viewed as creating more room for potential defense collaboration.

Why Google is Chasing $6 Billion in Government AI and Cloud Revenue

On the eve of the agreement's signing, more than 600 Google employees signed a joint letter to the CEO demanding the rejection of the deal, arguing it was the only way to ensure Google's AI is not misused. However, unlike the 2018 employee opposition to Project Maven, this collective letter proved ineffective, perhaps demonstrating Google's determination to rebuild its defense and military business.

Google established its Public Sector division in 2022 under Google Cloud. The division aims to penetrate the government market, particularly by taking on business from U.S. federal and state governments. According to internal Google data, its goal is to add approximately $6 billion in contract value between 2025 and 2027, which remains a small-scale business relative to Google's overall revenue. Furthermore, Google Cloud started later than its competitors and lags significantly in market share, as well as in its partnerships with the U.S. government.

Currently, collaborating with the U.S. government on defense and military initiatives has become the default choice for many AI giants. Between 2019 and 2022, the U.S. Department of Defense had two multi-billion dollar cloud computing contracts, namely DES and JWCC. In 2022, the U.S. Department of Defense awarded the $9 billion JWCC contract to Amazon, Google, Microsoft, and Oracle (ORCL) among the four cloud providers, with a project duration of five years.

Geoffrey Hinton, hailed as the 'Godfather of AI' for his significant contributions to artificial neural networks and deep learning, noted that nearly all AI giants currently have close ties with Trump. This may be partly to encourage the government to relax AI regulations to gain short-term benefits. U.S. financial news site Quartz pointed out that because the costs of training and running large models are exorbitant, many AI firms choose to cooperate with the government, which provides stable and lucrative orders.

Google vs. Anthropic: Navigating Pentagon Supply Chain Risks and Ethical Boundaries

For Google, the primary significance of this partnership with the U.S. Department of Defense likely lies in mitigating the risk of being designated a "supply chain risk." In February, negotiations between AI upstart Anthropic and the Pentagon publicly collapsed after Anthropic refused to accept an "any lawful use" clause, insisting on a bottom line that prohibits its technology from being used for mass surveillance and autonomous weapons systems. Anthropic was subsequently labeled a supply chain risk and is currently contesting the designation in court.

However, Google's decision to sign the agreement has also faced protests from more than 600 employees, which may pose a potential risk of talent attrition.

Previously, the English-language media outlet Business Insider reported that Anthropic's valuation in the private secondary market had surpassed $1 trillion, exceeding that of OpenAI. Glen Anderson, CEO of Rainmaker Securities, an investment bank focused on the private securities market, stated that one factor driving demand for Anthropic is its public standoff with the Department of Defense, noting, "People view this company as a hero because it dared to challenge a powerful government agency."

While the partnership with the U.S. Department of Defense will bring foreseeable revenue to Google's public sector, any improper application of technology in future collaborations that triggers large-scale market resistance could pose downside risks to Google's stock price.