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Anthropic is pushing ahead with its high-stakes IPO even as a brutal technology rout rocks markets, with the Claude maker willing to accept a valuation well below the $2 trillion hoped for by its most optimistic investors.
The AI startup is moving ahead with plans to list before the U.S. Thanksgiving holiday this month, according to several of the group’s investors, who said it expects to raise $80 billion to $100 billion at a valuation of between $1.25 billion and $1.75 billion.
That’s a step up from Anthropic’s current valuation of $965 billion, but it would be well short of the doubled price that investors predicted just a month ago.
“My view is they will set a very conservative price, call it $1.5 trillion, and go up from there,” said a major investor in the company. Others involved in the deal predicted a lower valuation of around $1.3 billion.
The lowered expectations are part of a broader reckoning in the technology sector, amid concerns about rising borrowing costs and rampant spending plans by AI companies. Those concerns prompted investors to sell AI-related stocks, while lenders backed away from high-risk projects.
The Democrats’ victory in the US midterm elections this week, thanks in part to their promises to prevent the construction of data centers, has significantly accelerated the sell-off.
U.S. stocks lost $3.2 billion in a chaotic trading day Thursday, with the tech-heavy Nasdaq 100 plunging 6.4 percent on concerns about a slowdown in the AI infrastructure boom. The Nasdaq regained some of its losses on Friday.
“AI shares are being sold off, making it harder for Anthropic to go public, which means less money for investments, which leads to additional sales,” said analysts at market research group Vital Knowledge.
Rival AI lab OpenAI struggled to complete its own private funding round, reducing the sought valuation from $1.4 billion to $1.25 billion and the round size from $30 billion to $20 billion.
Widespread enthusiasm for AI companies, which has propelled U.S. stock markets to new highs over the past three years, is fading, creating difficult conditions for Anthropic’s IPO.
The chances of Anthropic delaying the IPO have increased in prediction markets. But according to more than half a dozen Anthropic investors, the company still intends to go public, even if CEO Dario Amodei has to accept a price cut to do so.
“This is just a step on the path,” said one of Anthropic’s early backers. “They should treat it like any other fundraiser: a means to an end. »
The person added: “If (public market investors) don’t see the narrative at this point, they’re failing a basic IQ test. The next Google is dancing naked in front of you. If you don’t see the value, you don’t deserve to make money.”
Anthropic released its third-quarter financial data earlier this week, revealing revenue growth that had slowed but still jumped nearly 50 percent to around $17 billion. It plans to spend $900 billion on computing power and infrastructure over the next few years.
The company omitted from its prospectus its latest annualized revenue rate, which extrapolates recent performance and expectations regarding the sustainability of customer contracts. But that figure now stands at about $81 billion, up from about $65 billion at the end of July, according to several people with knowledge of the matter.
This figure will encourage investors who have been eager to see if Anthropic could continue to grow, amid increasing competition from OpenAI and its Chinese rivals. The Wall Street Journal earlier reported that annualized revenue had surpassed $80 billion.
JPMorgan is expected to host potential Anthropic investors for an “information session” on November 13.
Anthropic’s supporters hope its IPO will be propelled by so-called forced buyers, including index funds and large asset managers, who currently hold no shares but will in fact be forced to do so shortly after the company’s IPO.
The largest listing ever was that of Elon Musk’s SpaceX, which IPO’d at a valuation of $1.78 billion in June this year. Amodei has little interest in surpassing Musk, according to several people familiar with his thinking.
“They don’t care about being bigger than SpaceX or maximizing the IPO,” one investor said. “They give the majority of their income to charity anyway,” referring to the commitment of Anthropic’s seven co-founders to give 80 percent of their equity in the company to charitable causes.
However, Anthropic’s huge spending commitments mean it is under pressure to raise more funds. The group has nearly $150 billion in cash and liquid investments on its balance sheet and aims to raise a large enough sum that it never has to sell shares again, according to several people familiar with the group’s approach.
“Public markets are very averse to dilution,” said another large investor. “When you take a company public, that should be the last time you tap into the equity capital markets. But it opens the door to debt.”
Anthropic declined to comment.
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