Anthropic defies market turmoil to test public appetite for AI
TREE NEWS reports: Anthropic is moving forward with its highly anticipated initial public offering, even as a sharp selloff in AI-related stocks forces the company to consider a significantly lower valuation. The AI startup, known for its Claude chatbot, has begun meeting with key investors this week and aims to list its shares on the Nasdaq under the ticker “ANT” as early as next Thursday or Friday.
Just a week ago, investors had expected Anthropic to target a valuation of around $1.5 trillion. But after a brutal rout in AI stocks, some major investors are now pushing for a much lower figure. Discussions among potential investors have centered on a valuation of $1.2 trillion to $1.3 trillion, with some even considering a low of $1.1 trillion. The company and its bankers at Goldman Sachs and Morgan Stanley are working to finalize the price range.
Timing and valuation: a high-stakes balancing act
Anthropic filed its public prospectus on October 26, allowing it to begin formal marketing as early as November 10. If all goes smoothly, pricing could occur in the week of November 16, ahead of the Thanksgiving holiday on November 26. However, the volatile market environment has made valuation the central point of negotiation.
Months ago, whispers of a $2 trillion valuation circulated. Now, that number is almost certainly off the table. For investment banks, setting the right price is critical: too high, and investor demand may falter, leading to a poor debut; too low, and the company and its bankers face criticism for leaving money on the table. Bankers often encourage a slightly conservative range to leave room for an upward revision if demand proves strong. The upcoming filing is expected to detail the number of shares to be sold and the price range, and may reveal prominent investors already committed to buying at the IPO price.
Political and market headwinds weigh on AI sentiment
The IPO faces challenges beyond valuation disagreements. The broader risk appetite for AI has shifted dramatically. Following the U.S. midterm elections, a cohort of AI skeptics has gained power and implemented moratoriums that could slow data center development in the United States. In a single day, Nasdaq Composite constituents shed $2.5 trillion in market value. The Cboe Volatility Index (VIX) spiked above 25, reaching as high as 28. Historically, when the VIX is above 25, companies often consider postponing IPOs, senior strategist at Renaissance Capital.
Moreover, investors are increasingly concerned about the massive capital expenditures required for AI and the lack of clarity on returns. OpenAI, Anthropic’s rival, recently raised less than half of its initial funding target in its latest round, at a valuation below the targeted $1.25 trillion. That said, markets have since shown some recovery. The S&P 500 and the Philadelphia Semiconductor Index have rebounded, and the VIX has retreated, potentially giving Anthropic additional confidence to proceed. Kennedy noted that Anthropic’s IPO is not a typical listing and the current environment may not be enough to force a delay, but investors may demand a higher discount and more attractive valuation.
High growth but slowing momentum; investors focus on compute costs
At the heart of the valuation debate is whether Anthropic can demonstrate revenue growth sufficient to justify a massive public valuation. The prospectus shows third-quarter revenue of $16.956 billion, a staggering 1,127% year-over-year increase. However, growth is decelerating: the sequential increase in Q3 was 47%, down sharply from 144% in Q2.
Profitability is also under pressure. The company reported an operating loss of $567 million and a net loss of $23.291 billion in the third quarter. The swing to a loss was driven by approximately $5 billion in short-term compute procurement costs and about $2 billion in non-cash expenses related to an employee donation matching program. More concerning to the market, Anthropic disclosed total commitments for computing power purchases and infrastructure amounting to $895.4 billion.
Investors are eagerly awaiting October revenue data to gauge whether the company can reverse the recent growth slowdown. Revenue performance, enterprise customer usage, and compute cost control will be key metrics scrutinized during the roadshow.
Record-breaking offering could serve as industry bellwether
As one of the first companies focused on developing frontier AI models to attempt a public listing, the size and pricing of Anthropic’s offering will provide an important reference for the entire AI industry. The market is closely watching whether Anthropic’s IPO can rival the record-breaking listing of Elon Musk’s SpaceX, which was valued at approximately $1.77 trillion and raised between $75 billion and $86.2 billion. Anthropic’s offering could raise as much as $100 billion.
Led by Goldman Sachs and Morgan Stanley, with 20 other banks participating, the actual subscription results of this mega-IPO will send a clear signal: after a significant correction in AI stocks, how much premium is the public market willing to pay for the long-term growth potential of frontier AI companies?
Key takeaways for investors
- Valuation reset: Anthropic’s expected valuation has fallen from $1.5 trillion to as low as $1.1 trillion, reflecting a broader reassessment of AI assets. The final pricing will set a benchmark for the sector.
- Market sentiment indicator: The IPO’s success or failure will be a litmus test for public market appetite for AI, with implications for other AI startups and listed tech giants.
- Volatility persists: With the VIX still elevated and political headwinds mounting, expect continued swings in AI-related stocks. A delayed or downsized IPO could trigger further selloffs.
- Fundamentals in focus: Investors will scrutinize Anthropic’s revenue growth, path to profitability, and massive compute commitments. Slowing growth and rising costs are red flags.
- Broader implications: The IPO outcome will influence capital flows into AI infrastructure, semiconductor stocks, and the entire tech ecosystem. A strong debut could revive confidence; a weak one could deepen the correction.
