> If Anthropic does give the DoD what they want, does that magically stop China, Iran, Russia, etc from advancing in AI arms development?

No

> If Anthropic doesn't give the DoD what they want, does that mean that China, Iran, Russia, etc magically leapfrog not only Anthropic, but the entire US defense industry, and take over the planet?

The risks are high, so if you're the US, you want a portfolio of possible winners. The risks are too high to not leverage all the cutting edge AI labs.