• Scientific Exploration Goals: Current lunar initiatives focus on conducting geological surveys and gathering data to identify local mineral resources rather than immediate industrial extraction.
• Technological Hurdles: Developing reliable mining operations remains constrained by high energy demands, harsh thermal environments, and the physical challenges posed by abrasive lunar dust.
• Potential Resource Utilization: Researchers are investigating the extraction of water ice, helium-3, and metals to provide life support, fuel for propulsion, and material for deep-space transit.
• Environmental Protection Concerns: Experts emphasize the need for rigorous assessments to prevent irreversible damage to the lunar surface and potential long-term impacts on Earth's night sky ecosystems.
• Legal Framework Ambiguities: While the 1967 Outer Space Treaty prohibits national sovereignty claims, international law lacks explicit regulations addressing commercial mining or conflict resolution among private corporate entities.

Since Neil Armstrong took his giant step for mankind onto the Moon almost 60 years ago, small samples from the lunar surface have been brought back to Earth.

The samples provide a glimpse into what minerals are in the lunar regolith and missions such as Artemis II provide greater understanding of the Moon's environment.

As technology advances amid the race to send people to Mars, scientists and corporations are exploring how the Moon can be mined.

Here is a breakdown of some of the physical, environmental, legal and ethical challenges involved in Moon mining, according to a scientist, an engineer, a lawyer and an archaeologist.

First steps for extracting resources

Machines such as NASA's RASSOR (Regolith Advanced Surface Systems Operations Robot) are being tested for suitability to use on the Moon. (NASA)

CSIRO Mineral Resources senior principal research scientist Jonathon Ralston has been involved in developing mining technology for the Moon and Mars.

He says the first step is to gain an understanding of the environment in a similar way to how prospecting and exploration digs are conducted before resource extraction on Earth.

"And the exciting thing is we've been there a couple of times with the Apollo missions but there's so much more to learn about the Moon and there's a lot of unknown uncertainties," Dr Ralston said.

"When people use this term 'mining on the Moon', it's really much more closer to scientific exploration to understand what the local resources are there first before we can then start doing exciting things."

Sophia Casanova says there is a long way to go before mining on the Moon is possible. (Supplied)

Sophia Casanova is an Australian scientist based in Europe who designs surface missions for ispace, a private company that aims to transport payloads to the Moon or lunar orbit.

She said the technology that would enable mining on the Moon was still in its infancy, though companies were sending small components of the eventual process chain into space.

The CSIRO has a lab to test rovers for use on the Moon's surface. (Supplied: CSIRO)

Looking for ground truth

In 2019, 50 years after the first Apollo mission landed on the Moon, NASA re-examined its lunar samples.

"They've been studied extensively to understand what the actual materials are and there's been a lot of work with people then basically creating analogues of those materials so they could do testing here on Earth," Dr Ralston said.

Listen to our daily Artemis II mission updates on the Artemis Explained podcast.

"The other aspect is there's been lots of orbital satellite technologies scanning the Moon for its composition. But what we're really looking for now is that ground truth.

"We want to have more ground-based missions that can do that calibration, and validation techniques so we can really understand what the material is in the moon, both on the surface and the subsurface, so that we can then make good decisions about what ways might we best make use of those resources to basically support mission activities."

Minerals in the regolith

Analysis of the lunar regolith has shown it is made up of about 50 per cent silica, along with a range of trace metals and other minerals.

Some missions have identified ice in regions on the Moon that are never touched by the Sun.

"There's a very, very excited group of people with the prospect of basically water ice on the Moon, which is a fantastic resource that could be utilised for both life support and also propulsion systems for the hydrogen and the oxygen as well," Dr Ralston said.

NASA estimates there are a million tonnes of helium-3 — an isotope rare on Earth — on the Moon.

Rare earth metals, which are used in smartphones, computers and advanced technologies, are also present on the Moon, including scandium, yttrium and the 15 lanthanides, according to research by Boeing.

A private company based in Seattle, Interlune, is aiming to be the first US company to commercialise resources from space, starting with helium-3 from the Moon.

Helium-3 is used as a coolant, including in cryogenics, making it useful for data storage.

Dr Ralston said opinion was divided on whether helium-3 was present in a high enough concentration and that the big challenge would be developing methods to recover it and transport it back to Earth.

ispace is testing rovers for use on the Moon's surface. (ispace)

Dr Casanova said a lot of the focus was on understanding what the environment was like on the lunar south pole.

"So it's still quite a way off from any sort of extraction-level processes or big processes," she said.

"The technologies are very small demonstrations. We're still very constrained by the power and energy that's required for these technologies and the harshness of the space environment."

One of the other major minerals on the lunar surface is ilmenite, which is very rich in oxygen. There are also metals, including iron and titanium, that could be extracted.

A petrol station in space?

When people refer to resource extraction on the Moon, they generally do not mean to say that the materials would be brought back to Earth, but rather would be used in space.

Water is important because it can be separated into its components — hydrogen and oxygen — which can then be used as propellant or fuel for spacecraft.

"Essentially a petrol-station-in-space kind of concept — and a necessary one if we're looking [at] sending humans to Mars or for deeper space operations in the long-term," Dr Casanova said.

The lunar surface was a very challenging environment to operate in, Dr Casanova said, due to massive swings in temperature, and the material itself posed design challenges.

"The regolith material itself is very sharp, abrasive, and kicks up a lot of dust, which can interfere with the engineering design of all the functionality of the rovers," she said.

Rovers — remote-controlled vehicles designed to travel on the Moon's surface — have gathered information to help scientists better understand how to address the complexities of operating in such a harsh environment.

Dr Casanova said there were a lot of technological advances needed before any significant mining could be carried out on the Moon.

"There's a lot of challenges when it comes to resource-specific questions and technologies, because these technologies that we use on Earth, they're big, they're heavy, they're power-hungry, they can be less precise and they're not as constrained," she said.

The Artemis II mission is expected to further scientific knowledge. (NASA: Brandon Hancock)

Protecting the Moon

Space archaeologist Alice Gorman has been working on how to protect the lunar environment.

She said there had been increasing interest in resource extraction from the Moon.

"It's unfortunately a little bit similar to the Cold War space race," Dr Gorman said.

"There's an amount of national prestige involved in sending a surface mission and in successfully getting data or demonstrating that you're a little bit closer to lunar mining.

"A lot of the motivations for going to the Moon to mine are not actually about the ability to use resources or a commitment to lunar science.

"One of the concerns is that commercial operations will actually destroy the science that needs to be carried out."

She said it was paramount to have a thorough understanding of the impacts resource extraction would have on the Moon to prevent it from being irreversibly harmed.

"On Earth we're used to environments renewing themselves, bouncing back," Dr Gorman said.

"You can still cause incredible environmental harm, but we also have a sort of faith that rivers will keep flowing, vegetation will grow back and ecosystems can recover.

"But on the Moon it's not like that — processes are completely different, they happen at different timescales and we don't understand what are the longer-term impacts of moving lunar dust.

"One thing a number of lunar scientists have agreed is that it would be possible to move enough dust up into orbit around the moon, so there would be a dust cloud around the Moon."

If that happened, it could have catastrophic consequences for animals on Earth that depend on moonlight, such as some species of owl and marine turtles, she said.

The Artemis II crew took this photograph of the Moon's Vavilov Crater. (NASA)

Dr Casanova and Dr Ralston agree that lunar mining will be different to terrestrial mining and that caution is needed.

"When we talk about extracting resources on the Moon, it's not big trucks that are just picking up rock — we have to be very careful with this environment, so there will not be big coal trucks kicking up material and dust and everything," Dr Casanova said.

"There will be very precise movements, very precise activities to extract these resources, very little disturbance."

From the Moon to Mars

Mining on Earth almost always involves large amounts of water and energy.

But on the Moon there is no carbon and no liquid water.

"The very challenges that we need to address to do processing of resources on the Moon are exactly the kind of technologies we also need here right on Earth as well," Dr Ralston said.

Dr Casanova said mining on the Moon involved the resources themselves, which could potentially be used to support ships travelling between Earth and Mars, the creation of new technology and learning how to live away from Earth.

"Being able to develop and operate in an environment that, although not completely analogous to Mars, has many similar constraints in terms of power, communications, living in an atmosphere-free environment without breathable oxygen," she said.

Dr Casanova said the Moon would be a testing ground before humans progressed to Mars.

Legal and sovereignty issues

The Outer Space Treaty of 1967, developed by the United Nations and signed by the US, Russia and the UK, has nine main principles, including that the Moon be used exclusively for peaceful purposes.

It also states that outer space not be "subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means".

There is also a clause stipulating that all areas of the Moon should be accessible to everyone.

The Outer Space Treaty of 1967 says all areas of the Moon should be accessible to everyone. (NASA)

But Dr Gorman said there were untested areas of ambiguity — for example, exclusion zones around mining areas.

"And of course there could be commercial in-confidence operations going on because there's this huge emphasis now on private corporations and commercial operations for profit as a way to finance the science," she said.

Dr Gorman said it was unclear how mining on the Moon meshed with the Outer Space Treaty.

Unlike in Australia, where there are laws governing mineral exploration and extraction, there are no explicit laws in place regarding the Moon because no nation has sovereignty over it.

"There's a lot of Moon and there's a lot of south pole, so it would be possible for numerous nations or companies to be carrying out resource extraction and not ever overlap or come into conflict with each other," Dr Gorman said.

"But what happens if they do? And what happens if the area somebody wants to mine is also one that scientists would like to preserve for future study?"

The UN developed a Moon Treaty in 1979.

But space lawyer Gregory Radisic said only 18 countries had ratified it and none of them had actually landed on the Moon.

"If you don't have a rocket ship and you can't go there, then that's fine, you can sign anything you want, but you're not really part of the party," he said.

Mr Radisic, who is a fellow at For All Moonkind, a not-for-profit organisation that advocates for protection and the development of laws in space, explained that countries, including the US and the former USSR, agreed to a principle of non-appropriation during the 1960s.

"It is basically a legal doctrine saying no-one can own land on the Moon or any celestial body," he said.

"But then you had all these Apollo missions, where it's almost like mining was happening under the guise of scientific exploration and research, bringing back rock samples."

The United Nations Office for Outer Space Affairs has a working group drafting legal aspects of space resource activities, but even if countries sign up to the recommended principles, once they are finalised, they are non-binding.

The draft principles include environmental assessments before any resource extraction, avoiding adverse changes to Earth and the harmful contamination of the Moon.

But given that much of the space race is being led by tech billionaires who tend to follow the Silicon Valley ethos of "move fast and break things", it is unclear what would happen if private companies decided to ignore the draft principles, though they do put the onus on nations to take responsibility.

NASA's ISRU Pilot Excavator (IPEx) performs a simulated lunar mission in a testbed at the Kennedy Space Center. (NASA: Frank Micheaux)

"It's a fairly common opinion that the space barons or the space billionaires aren't best placed to judge the ethical issues around lunar mining," Dr Gorman said.

"When governments carry out these exercises, they are accountable to the public but private corporations are not."

Space barons and billionaires

NASA and other space agencies are outsourcing a lot of their projects to private actors, such as Elon Musk's SpaceX and Jeff Bezos's Blue Origin.

Dr Gorman said she was concerned about what that could mean for the future of the Moon.

"Your average space billionaire probably doesn't give a rat's arse about future generations," she said.

"Elon Musk has set his sights on Mars, so are we going to sacrifice the Moon so that some of these space billionaires can conquer Mars in that old sort of colonialist way?"

In January, NASA and the US Department of Energy announced a renewed commitment to support the research and development of a nuclear fission surface power system for use on the Moon via the Artemis campaign and future missions to Mars.

Russia also plans to put a nuclear power plant on the moon in the next decade in order to supply its lunar space program and a joint Russian–Chinese research station.

International rules ban putting nuclear weapons in space but there are no bans on nuclear energy sources.

Mr Radisic said it was important to consider what impacts construction on the Moon might have back on Earth.

"Imagine you see a new moon and all of a sudden there's a light flickering back at you," he said.

"Even just from that cultural perspective, how does that change every child's perspective of outer space once that starts happening?

"Same with heritage — what if we land a craft and all of a sudden Neil Armstrong's first bootprint on the Moon is wiped away?

"How devastating would that be for humanity? Just so we can have a power source?"

• Geological Refuge Strategy: Microbes may have relocated to subterranean environments like lava tubes, groundwater caches, or fissures to escape the uninhabitable surface conditions of Mars.
• Dormancy Survival Mechanism: Organisms could potentially persist through harsh climate eras by entering spore or cyst states, reactivating only when liquid water conditions emerge.
• Hygroscopic Salt Utilization: Similar to extremophiles in the Atacama Desert, Martian life might inhabit salt crusts that draw moisture directly from the atmosphere via deliquescence.
• Alternative Biological Solvents: Biological systems on the planet might utilize substances like hydrogen peroxide-water mixtures instead of standard saline, enabling cellular function in extreme cold without freezing damage.
• Evolutionary Adaptation Limits: Scientific investigation continues regarding whether Martian organisms could independently develop complex survival strategies unseen on Earth or thrive in hypersaline, low-moisture environments.

With the latest detection of organic compounds by the Curiosity rover, the case for past life on Mars becomes stronger than ever, as suggested in a recent paper by Alexander Pavlov in the journal Astrobiology. And that lends additional credence to an even more exciting idea — that living organisms may still exist on Mars today.

If that’s true, what form should we expect them to take? And where should we search for them? The planet’s surface is a brutal environment for any known type of organism, with huge temperature swings (from approximately -150 °C to 25 °C), virtually no water, and high doses of radiation. Yet we know from our own planet how resilient and adaptive life can be. Besides, this hostile environment didn’t always exist on Mars.

So if life once thrived on the Red Planet, where did it go?

Option 1: Retreat!

We know from half a century of robotic Mars exploration that the planet once had watery environments similar to those on Earth’s surface, probably including shallow lakes, streams, and deeper-water seas. It may even have had hydrothermal vents similar to those found in our deep oceans, which may have been where life originated on Earth. With all that water, microbial life could have become well established before climate change made the surface uninhabitable. As the planet got colder and drier, any microbes might have retreated into isolated niches, such as groundwater beneath the permafrost or underground lava tubes, fractures, fissures, and caves. Or they may have migrated to areas where the ground was warmer, like the volcanic provinces of Arabia Terra.

Option 2: Go dormant 

While the evolutionary history of Mars is still to some degree uncertain, it seems clear that the planet has had long dry and cold stretches interspersed with warmer and wetter periods that extended almost up to the present era. On Earth, a common adaptive strategy for surviving temporarily inhospitable conditions is dormancy. Dormant microbial states, such as the spores or cysts we find in cold environments like Antarctica, may have allowed Martian organisms to tough it out through harsh conditions until the environment became hospitable again. The big question here is whether evolution on Mars would have progressed far enough to develop dormancy as a strategy. It’s unknown when spores first appeared on Earth — fossilized spores are notoriously difficult to identify, so the fossil record isn’t much help.

Life could potentially bloom and reproduce at a high rate during periods when liquid water reappears on the surface.

Because early Earth environments could also have been inhospitable, it seems likely that dormancy developed early in our planet’s history. On the other hand, spores and similar dormancy states are quite complex to achieve. They require a complex genetic development program, and so would not be expected to be among the first adaptations that life tried in order to survive environmental change.

Let’s imagine that dormant life has persisted on Mars up until modern times. It could potentially bloom and reproduce at a high rate during periods when liquid water reappears on the surface, not unlike what happens in hyperarid deserts on Earth. Wetter periods could result from flooding triggered by episodic volcanism and meteor bombardment, or from snow or ice melt. Even so, Martian organisms would still be expected to spend most of their lives in the spore state, as inhospitable conditions would last for very long stretches of time. 

Option 3: Hide under a rock

Based on the ecological adaptations we see in desert ecosystems on Earth, there is a pattern of changes that comes with increasing dryness. The last refuge for surface life in places like the Atacama Desert of Chile is inside salt crusts that are hygroscopic, meaning they draw water directly from the atmosphere. (Think how salt gets clumpy if you leave it in humid air for too long.) This effect becomes very pronounced in hyperarid environments like the Atacama, and could also work for life on Mars. Some microbes on Earth don’t need any other source of water to persist and grow. If the salty rock absorbs so much moisture that some of it dissolves and forms a solution, the process is called deliquescence. This is how terrestrial microbes survive in places where it may rain only once in a decade, like in the Atacama. In theory, the same thing could happen on Mars.  

Option 4: Some strategy unknown to us

Data from radar sounding experiments on Mars orbital missions suggest that underground lakes or pockets of groundwater may exist tens of meters below the surface of Mars. If true, these would likely be concentrated mixtures of water with chloride or perchlorate, given the temperature-depth profile. The question then arises whether life could thrive in these types of very concentrated brines. Experiments done with Debaryomyces hansenii, a microbe known to be very tolerant of perchlorate, showed that it could still grow at concentrations of 2.5 mol/kilogram. That’s high, but still far from the nearly saturated solution we might expect in the Martian subsurface. Salt solutions that stay liquid under those conditions, like magnesium chloride or calcium perchloride, are toxic to life. Could Martian organisms, if they exist, adapt to this kind of environment over many generations of evolutionary change?

They’d also need to be able to thrive in places much drier than any known on Earth — or, to use a more technical criterion, environments with very low “water activity.” The absolute lowest level of water activity for life on Earth to thrive seems to be somewhere between 0.5 and 0.6.  However, while the overall water activity measured at any particular location might be unacceptably low, water may still be available on a microscopic level. For example, a study led by Rainer Meckenstock discovered minuscule water droplets in a lake of liquid asphalt that, surprisingly, contained bacterial communities — even when water activity in the lake as a whole measured 0.49. On Mars, if water activity were to fluctuate over the daily cycle, microbes could go dormant when it falls below a certain threshold level, then become active again when it rises.

Or maybe Martian organisms can thrive at much lower water activity levels than we find on Earth. We don’t know. The problem is that they’d have to be able to survive in highly changeable conditions in Earth’s deserts, from bone-dry to drenched. Even in the most arid deserts on Earth, there are extreme rain events when a lot of water suddenly becomes available. In one reported case, a downpour in the Atacama killed off more than 80% of bacterial species that were perfectly happy under normal dry conditions. The rain effectively drowned them. 

Credit: NASA/JPL-Caltech/University of Arizona

Martian dunes, captured by NASA’s Mars Reconnaissance Orbiter.

Natural selection on Mars may not have had to contend with such wild swings, and “double adaptation” may only be a problem on Earth, according to Janusz Petrowski at the Wrocław University of Science and Technology in Poland. On planets that are always reliably dry, things may go easier, evolutionarily speaking. Recent experiments show that minute amounts of water are clearly sufficient for some microbial species. Even with no standing water, they may be able to use groundwater-derived water vapor, hydrated minerals, or water capture during metabolism.  

On Earth, water serves another important biological purpose. Microbes use salt water as their intracellular fluid, while humans use a compound with similar properties — blood — for a variety of purposes (which explains why we get IVs with salt water). On Mars, with its extremely low temperatures, a mixture of hydrogen peroxide and water may be more useful than saltwater.

In fact, as Joop Houtkooper and I pointed out in a 2007 paper, hydrogen peroxide has several advantages on Mars: mixed with water, it can stay liquid at temperatures down to -56 oC. It doesn’t form ice crystals when turning solid (which could pierce cell membranes), and is hygroscopic. The idea of hydrogen peroxide inside cells may sound preposterous at first, since that’s the stuff we use as cleaning agents to sterilize surfaces. Not so fast, though: Certain microbes are known to produce hydrogen peroxide in our mouths, and the Bombardier beetle has a 25% hydrogen peroxide-water mixture in its posterior chamber. In other words, hydrogen peroxide can be consistent with biology, which, incidentally, relates to why the Viking life detection experiments of the 1970s were so puzzling. 

In trying to imagine how life on Mars could have developed and survived, it’s time to take full advantage of the last half-century of progress in biological and planetary science. As Mars exploration advances — a planned Chinese Mars sample return mission may be the next major step, as NASA’s own plans for a sample return mission have faltered — we might get a new understanding of all that biochemistry can do.

• Economic Competitiveness: Restricting data center construction threatens technological innovation and shifts infrastructure investment toward international rivals like China.
• Water Consumption Metrics: Industrial cooling usage by data centers represents a fraction of the water consumption attributed to the golf industry or lost to aging municipal plumbing infrastructure.
• Grid Expansion Sustainability: New energy demand from technological facilities functions as an infrastructure investment that provides long-term benefits to the broader power grid and consumer base.
• Private Sector Risk Allocation: Legislative frameworks such as the DATA Act and state initiatives support off-grid power solutions, ensuring private entities bear the financial burdens of their energy consumption.
• Policy Alternatives: Regulatory attention should prioritize modernizing existing public infrastructure and enabling independent power development rather than imposing federal moratoriums.

A data center building in Abilene, Texas, Sept. 23, 2025. Kyle Grillot/Bloomberg News

Sen. Bernie Sanders proposes a federal moratorium on data center construction (“AI Is a Threat to Everything the American People Hold Dear,” op-ed, April 3). Trying to hit the “pause” button on innovation will simply drive investment to competitors like China, which is racing to build, not freeze.

Data centers consume water, like any other industrial building, but the magnitude isn’t as dire as Mr. Sanders implies. American data centers used 17 billion gallons of water for cooling in 2023 and another 211 billion gallons indirectly through electricity generation, which applies to any buildings using electricity.

Even if direct cooling water use by data centers triples by 2030, it would amount to about a tenth of what the U.S. golf industry uses. The U.S. loses over two trillion gallons of water annually to leaky pipes, a far larger problem and a far better use of Congress’s attention.

Data centers do place significant demands on the grid, but new data center demand is only a problem when the grid can’t grow fast enough to support it. Large customers like data centers often cover the full cost of the infrastructure built to serve them, investments that remain part of the grid and benefit all ratepayers.

Instead of hitting pause on data centers, Congress should look to the DATA Act and state-level consumer-regulated electricity initiatives. These let data centers build their own power off-grid, insulating ratepayers while putting the investment risk where it belongs: on the private sector.

Sarah Montalbano

Always On Energy Research

Seminole, Fla.

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• Model Origin: Alibaba Group released the HappyHorse-1.0 AI video generation model under an anonymous identity.
• Market Competition: The development serves as a strategic move to contest ByteDance’s dominance in AI video generation and cloud services.
• Performance Metrics: HappyHorse-1.0 currently holds the top position on the Artificial Analysis leaderboard for text-to-video and image-to-video capabilities.
• Commercial Integration: Alibaba plans to integrate the technology into its cloud computing platform for access by enterprise-level clients.
• Strategic Deployment: Anonymous model releases followed by official branding represent a recurring marketing tactic used by Chinese technology firms to build user momentum.

Alibaba Group has anonymously released a new AI video generation model called HappyHorse-1.0, which rose to the top of an AI model leaderboard and attracted a lot of attention on social media, according to two people with knowledge of Alibaba’s involvement.

The new video model is the Chinese tech giant’s latest effort to step up its fight against its major rival ByteDance in all areas of AI, from models to applications to AI cloud services. Alibaba hasn’t publicly said it is the developer of the HappyHorse model. But Alibaba’s cloud computing unit is preparing to make the new model available to its enterprise customers, according to one of the people.

HappyHorse-1.0 is currently ranked No. 1 in the text-to-video and image-to-video categories on a leaderboard compiled by Artificial Analysis, beating ByteDance’s Seedance 2.0 model, which is ranked No. 2.

ByteDance, which owns TikTok, is a global leader in AI video generation. The company’s Seedance 2.0 model, released in China in February, wowed the world with its ability to create hyperrealistic videos but also faced copyright disputes with Hollywood studios.

Releasing new AI models anonymously under codenames first—and making official announcements later—has become a popular tactic among Chinese companies to generate more excitement among users. Last month, smartphone maker Xiaomi released its new large language model, MiMo-V2-Pro, initially under the codename Hunter Alpha on the OpenRouter AI model marketplace. In February, an anonymous new AI model on OpenRouter called Pony Alpha turned out to be Chinese AI firm Zhipu’s new GLM-5 model.

• Technological Impact: Artificial intelligence agents are being deployed to automate complex white-collar tasks, impacting industries such as law, finance, and cyber security.
• Trust Requirements: High-stakes sectors prioritize authoritative, traceable, and accountable outcomes, viewing these standards as critical differentiators over mere processing speed.
• Industry Exposure: Market vulnerability varies significantly, with unregulated sectors or those reliant on public data facing higher disruption risks than those requiring proprietary data and domain expertise.
• Enterprise Integration: Existing software providers are incorporating AI plug-ins to enhance efficiency, though observers note these cannot replace fundamental systems of record or established regulatory frameworks.
• Financial Evaluation: Public market sentiment remains focused on which firms can effectively capture value, with software companies under pressure to demonstrate clear return on investment through upselling.
• Cyber Security Dynamics: While AI models demonstrate improved capability in identifying code vulnerabilities, human expertise remains essential for broad deterministic reasoning and handling active adversarial threats.
• Operational Limitations: Current AI tools are described as ineffective at high-level judgment and prone to hallucinations, rendering them unsuitable for scenarios requiring absolute precision and human accountability.
• Strategic Collaboration: AI developers acknowledge professional limitations, positioning their software as complementary tools to boost efficiency rather than as replacements for comprehensive enterprise platforms.

AI “agents” are threatening to transform white-collar work, offering cheaper, faster software that can perform the tasks of lawyers, bankers and accountants.

The reality is more complicated.

Since the start of the year, AI companies such as Anthropic have released tools designed to automate tasks across professions, prompting a sharp reassessment of stocks from cyber security to financial services.

But interviews with a dozen chief executives, investors and analysts across sectors suggest not all parts of the market are equally exposed. In industries where accuracy, accountability and regulation matter, trust is emerging as the critical faultline.

“Fiduciary professions like law, tax, audit and compliance require more than . . . accelerating everyday knowledge work,” said Steve Hasker, chief executive of Thomson Reuters.

“What ultimately matters is whether the output is authoritative, traceable and accountable to professional standards. In high-stakes environments, speed alone isn’t the differentiator. Trust is.”

Anthropic released a slew of tools this year that allow professionals from lawyers to bankers to infuse their day-to-day tasks with AI capabilities © Jeenah Moon/Bloomberg

Despite bullishness among some business leaders, there is broad agreement that companies must evolve in the face of products like Anthropic’s Claude Cowork or face extinction.

Customer services software companies, as well as sectors that are unregulated or use public data, such as data aggregators or marketing content firms, are all viewed as under threat.

“It is indisputable that the technology is very powerful,” said Victor Englesson, a partner at Nordic-headquartered investment firm EQT Partners, who focuses on software and technology investments.

“The key question, which the public market has voted on, is who is best positioned to capture that value. At the core, the size of the pie has grown. There will be winners and losers, but it will come down to execution.” 

Investors and executives said they were drawing up war plans to grow and reallocate capital, after Anthropic released a slew of tools this year that allow professionals from lawyers to bankers to infuse their day-to-day tasks with AI capabilities. 

The new products are an extension of the company’s Claude Code, which uses large language models to generate code. Anthropic’s own finance department is using Cowork — a version of Claude Code for non-technical professionals — as it prepares for an initial public offering as early as this year. 

“Our finance team uses this for a lot of our growth projections, so they’re constantly understanding how much capacity we’re using and which customer segments are growing and which we should invest more in,” said Catherine Wu, head of product for Claude Code at Anthropic.

Customisable AI “plug-ins” help automate company-specific software, allowing AI to help with contract reviews, sift job applications, visualise ideas or perform financial analysis and modelling.

When Anthropic first launched these software-focused tools in February, a stock market sell-off dubbed the “SaaS-pocalpyse” indiscriminately hit software businesses.

After the initial sell-off, Anthropic unveiled an updated set of tools designed to work with many of those same companies, offering a brief reprieve to their embattled share prices.

Thomson Reuters launched CoCounsel Legal, its AI tool powered by Claude’s latest model, to perform complex tasks from legal research, document analysis and drafting, using its proprietary content.

Hasker said AI models on their own were not necessarily built for fiduciary work, where “professionals are responsible for outcomes and errors carry real consequences”. 

He added that “almost right isn’t good enough, whether in a courtroom, a boardroom or an audit”, adding that grounding systems in domain expertise would become essential in coming years. 

Private investors focused on software agree that AI plug-ins can be bolted on to existing systems to improve efficiency and replace some human roles. But they cannot fully replace core enterprise software built on years of accumulated data across a company’s supply chain and operations.

“[AI] plug-ins . . . can’t replace proprietary data, systems of records, regulatory context, network effects [and] distribution . . . that’s my defensibility,” said Jean-Baptiste Brian, co-chief executive of private equity firm Hg Capital, which invests primarily in software businesses. 

Others argue that even if AI does not entirely kill enterprise software, slowing growth or marginal hits to revenues will leave Wall Street investors heavily exposed. 

“There has been an issue in terms of top-line growth for a long time and that has been amplified by AI,” said Englesson. To prove the public markets wrong, he said, software groups must show that customers are willing to pay for new AI capabilities by upselling and bringing in new customers to show a clear return on investment. 

Anthropic’s own finance department is using Cowork — a version of Claude Code for non-technical professionals © Gabby Jones/Bloomberg

In February, Anthropic released a preview of a cyber security tool, triggering a sharp sell-off across the industry, affecting companies ranging from Palo Alto Networks, CrowdStrike, Okta and SentinelOne. 

Dan Schiappa, a 20-year veteran of the cyber security industry and president of technology and services at Arctic Wolf, acknowledged that the latest Claude releases were a “vast . . . step function improvement” in terms of cyber security competence. 

“It’s a bit of a glimpse into the future,” Schiappa said. “If you’re in that market of code vulnerability finding, like [start-up] Snyk for example, it is meaningful for your business.”

This week, Anthropic previewed a new model, Mythos, which it said had found “thousands of high-severity vulnerabilities” in every major operating system and web browser.

Mythos’ capabilities could “reshape cyber security”, Anthropic said. It is working with CrowdStrike and Palo Alto Networks, as well as several Big Tech groups, to address the vulnerabilities.

However, Schiappa said that cyber security expertise is far broader than simply spotting vulnerabilities in code.

“AI is great at very directed tasks, it’s not quite great at broad deterministic reasoning yet. It can make a recommendation but it’s not sure enough to take action. That’s where humans come in,” he said. “They have . . . done hand-to-hand combat with adversaries. They know it, they have seen it before, intuitively.”

He added: “We are an industry where we cannot take chances. People’s businesses are at stake.”

In financial services, Anthropic has launched a cluster of plug-ins focusing on subdivisions such as investment banking, private equity, equity research and wealth management. 

The company has said this would enable AI to perform tasks like reviewing large sets of transaction documents, building competitor analyses, parsing earnings transcripts and updating financial models in real time by extracting financial data and modelling scenarios. 

Investors who have used the tools say AI agents like Cowork are good at gathering and parsing unstructured data, and that they are using them for tasks like market research, deal sourcing and screening, and even drafting early-stage investment memos. 

However, Hg’s Brian says the technology remains “absolutely crap at judgment”, describing AI tools as “sycophantic”, or agreeing too readily with a user’s hypothesis. “It can’t do investing right now,” he said. 

Sam Jones, chief operating officer of Compare the Market, which helps customers compare prices for insurance and financial products, said the risk of AI supplanting companies like his was “a pretty key question for the industry at the moment.”

But Jones said companies like his are building a secure harness around AI models to ensure its outputs are accurate, transparent and verifiable as customers and regulators expect. 

“Plugging [AI] into an insurer, whilst technically possible, today generates pretty catastrophic consumer outcomes,” he said. “It can hallucinate on consent, it can hallucinate on terms and conditions, it can hallucinate on prices.”

Anthropic’s Wu emphasised that AI systems need existing software platforms in order to make work more efficient, not replace traditional players. 

“We’re not going to be best in class at collaboration [or] at managing all your sales deals, or all your designs. We would just never have that ability to assume all that functionality within Cowork,” she said. “Being an everything app . . . it feels overly ambitious for us to do.” 

Additional reporting by Alexandra Heal and Antoine Gara

The AI rollout is here - and it's messy | FT Working It

• Legal Setback: A federal appeals court denied Anthropic's request to overturn its designation as a supply-chain risk by the Department of Defense.
• Security Priority: The court prioritized national security and military interests over the potential financial harm experienced by the private corporation.
• Contractual Exclusion: The ruling maintains the company's exclusion from new government contracts and Pentagon systems during the ongoing legal dispute.
• Transition Deadline: The administration has mandated that the Department of Defense phase out the use of Anthropic's artificial intelligence models within a six-month period.
• Regulatory Conflict: The designation followed failed negotiations regarding the use of Anthropic's technology in fully autonomous weapons and domestic surveillance operations.
• Judicial Inconsistency: Legal uncertainty persists as this appellate decision contrasts with an earlier injunction issued by a California court against broader federal bans.
• Industry Compliance: Several competitors within the artificial intelligence sector have already agreed to meet the established governmental terms for defense contracts.
• Operational Expansion: Despite the defense restrictions, the company is continuing to distribute new artificial intelligence models to various private infrastructure entities.

By

Amrith Ramkumar

and

Heather Somerville

April 8, 2026 7:37 pm ET

49

Anthropic headquarters in San Francisco John G Mabanglo/EPA/Shutterstock

WASHINGTON—A federal appeals court on Wednesday denied Anthropic’s request for relief from the Defense Department declaring the company a supply-chain risk, complicating the legal battle between the U.S. government and one of the country’s leading artificial-intelligence companies.

While Anthropic has sustained financial harm from the Pentagon’s actions, the appeals court said that it didn’t feel strongly enough to override the government on a matter of national security. A separate court in California recently granted Anthropic a preliminary injunction to stop President Trump’s broader ban on all federal agencies using the company’s Claude models. 

Wednesday’s decision means that the Defense Department’s designation of Anthropic as a security threat stands, so the company will continue to be excluded from new contracts and Pentagon systems. In late February, Trump gave the Defense Department six months to transition away from Claude, which is being used in the war in Iran.

“On one side is a relatively contained risk of financial harm to a single private company. On the other side is judicial management of how, and through whom, the Department of War secures vital AI technology during an active military conflict,” the appeals court said in its decision. 

The case will now proceed alongside the government’s appeal of the California court ruling, creating legal uncertainty for companies that work with both Anthropic and the government. Some companies have said that they would stop using Claude in their government work to avoid any potential issues.

“The D.C. Circuit’s denial will prolong ambiguities regarding whether political considerations can drive federal procurement,” said Matt Schruers, chief executive of the Computer & Communications Industry Association.

The Pentagon applied the supply-chain risk designation against Anthropic using two different statutes, one of which is under the jurisdiction of the Washington appeals court. 

Defense Secretary Pete Hegseth designated the company a supply-chain risk after attempts to renegotiate its contract with Anthropic fell apart. Anthropic had sought assurances that its models wouldn’t be used in fully autonomous weapons or for domestic surveillance. The Pentagon countered that such prohibitions were unnecessary because military policies or laws already restricted such uses, and pushed for an agreement in which the military could use the AI in all legal applications.

“​​Today’s D.C. Circuit stay allowing the government to designate Anthropic as a supply chain risk is a resounding victory for military readiness,” said Todd Blanche, the acting attorney general.

The supply-chain risk designation is normally used on companies from U.S. adversaries such as China that pose security threats, making the Defense Department’s move against Anthropic nearly unprecedented.

Some of Anthropic’s competitors including OpenAI and Elon Musk’s xAI have since agreed to the Pentagon’s terms.

The company has said it could lose revenue and investors because of the government’s actions, arguments that the appeals court acknowledged in its decision. 

“We’re grateful the court recognized these issues need to be resolved quickly and remain confident the courts will ultimately agree that these supply-chain designations were unlawful,” an Anthropic spokeswoman said. “While this case was necessary to protect Anthropic, our customers, and our partners, our focus remains on working productively with the government to ensure all Americans benefit from safe, reliable AI.”

The risks posed by AI were illustrated again on Tuesday, when Anthropic said it is making a preview version of its new AI model available to about 50 companies and organizations that maintain critical infrastructure, including U.S. tech giants, before releasing it publicly. The company said it worried that releasing it now could cause widespread disruptions online.

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Amrith Ramkumar is a reporter for The Wall Street Journal in Washington covering tech and crypto policy. He previously covered clean energy and was a Journal markets reporter in New York who wrote about special-purpose acquisition companies, or SPACs, when SPAC mergers were a popular alternative to traditional initial public offerings. He also previously wrote about stocks and commodities, including battery metals such as lithium and cobalt.

Amrith joined the Journal as a markets intern after graduating from Duke in 2017.

Heather Somerville is a reporter at The Wall Street Journal in San Francisco covering technology and national security. Her articles explore the national-security implications of emerging technology, U.S. efforts to counter China's rise as a technology power, and the relationship between Silicon Valley and the U.S. defense complex.

Heather joined the Journal in 2019 to cover venture capital and technology companies. Before that, she wrote about venture capital and Silicon Valley startups for Reuters and the Mercury News. She was previously a reporter for the Fresno Bee and the Charlotte Observer and wrote about national security for outlets in Washington, D.C.

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