Anthropic’s IPO faces major headwinds, with the company expected to go public at a significantly lower valuation than initially anticipated amid the ongoing jitters in the artificial intelligence (AI) industry.
Anthropic IPO Could See a Valuation Cut to $1.5 Trillion
It has been a tumultuous period for companies in the artificial intelligence industry, with many of them seeing their valuations dive. Nvidia stock has moved into a correction after falling by double digits from its all-time high. The same is happening with other popular names like AMD, CoreWeave, and IREN.
The ongoing retreat has had a major impact on Anthropic, the biggest AI lab in the world, as it considers going public. According to the WSJ, the company’s investors believe that it will be hard for the company to achieve the record $2 trillion valuation it was aiming for.
These concerns jumped after the stock market crashed on Thursday, with the Nasdaq 100 sinking into a correction. The S&P 500 and Dow Jones also dropped substantially after the Democrats won the midterm election convincingly.
The WSJ report notes that the eventual valuation will be about $1.5 trillion, with some investors expecting it to be about $1 trillion.
This valuation makes Anthropic the fastest-growing company to cross the $1 trillion mark. In contrast, it took decades for companies like Amazon, Nvidia, Berkshire Hathaway, and Alphabet to cross that valuation.
Anthropic S1 Document Showcased Growing Revenues But Substantial Risks
The recently released S1 document showed that Anthropic’s business is doing well, with the revenue growth accelerating. It made $17 billion in the third quarter, with the number of customers growing substantially.
However, the report also showed that the company faces some substantial risks ahead. One of the key risks is that Anthropic’s losses jumped in the quarter, reaching a high of $23 billion. $21.9 billion of this was due to a non-cash charge related to the value of its convertible bonds.
Another risk is that most of the company’s revenue comes from a handful of clients. This means that its growth would be affected if one or more of these companies decided to move to other AI companies.
Anthropic is also spending billions of dollars in computing deals by companies like CoreWeave, Nscale, and SpaceX. This means that it will take some time for it to become free cash flow positive.
Further, there are concerns that the AI business will flop, with the AI Stock Bubble Index rising to 74. Some popular analysts, including Ray Dalio and Ken Griffin have warned that the bubble may burst soon as interest rates rise. Yesterday’s strong nonfarm payrolls(NFP) data suggests that the Fed will deliver another rate hike in December.
SpaceX IPO Trends Points to Risk to ANT Stock
Meanwhile, investors are concerned about Anthropic following the hyped SpaceX IPO. While the stock initially jumped, it then plunged to $105, costing investors over $1 trillion. Its attempts to rebound faced substantial resistance at $176. As such, investors are concerned that the ANT stock will also drop.
Indeed, data shows that most of the recent IPOs have flopped. For example, Circle Internet Group initially surged to $300 after its IPO last year. Since then, it has dropped to $67 as its revenue growth has stalled.
Similarly, CoreWeave initially surged to $186.7 after its IPO last year and then retreated to the current $46. Gemini Space Station rose to $46 and then dropped to $2.46 today.
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