Anthropic eyes $1.4 trillion IPO valuation in major test of AI investor appetite

Anthropic will also raise $26 billion via a separate private placement deal with cornerstone investors, including Google, Nvidia and Advanced Micro Devices.

Anthropic's blockbuster IPO will value the Claude chatbot creator at up to $1.4 trillion, slightly short of some investors' expectations, setting up a key test of Wall Street's faith in the AI boom it helped ignite.

Anthropic's blockbuster IPO will value the Claude chatbot creator at up to $1.4 trillion. (REUTERS)

The company is kicking off the roadshow for a share sale expected to set a benchmark for the sector, following years of hype that fueled a massive influx of capital into AI companies and sent the US stock market to all-time highs.

Anthropic's owners are plowing ahead despite a recent selloff across the tech landscape, as investors question whether the AI boom's returns will justify the massive spending and mounting debt costs in an elevated interest-rate environment.

The AI lab and some of its existing shareholders are aiming to raise up to $64.4 billion in the IPO by selling 825 million shares priced between $70 and $78 each. Shares are expected to start trading on the Nasdaq on November 19 under the symbol "ANT."

Anthropic will also raise $26 billion via a separate private placement deal with cornerstone investors, including Alphabet's Google, Nvidia — whose CEO is subject to a probe over his affair with an alleged Chinese spy — and Advanced Micro Devices.

The IPO is the year's most closely watched since Elon Musk's SpaceX, which raised $75 billion at a nearly $1.75 trillion valuation in June.

The tech-heavy Nasdaq was down 1.2% in afternoon trading, hit by worse-than-forecast inflation numbers. Shares of Anthropic investor Amazon rose 1%, outperforming other big-tech peers.

Investors are raising concerns over the sustainability of the investment cycle, particularly around how quickly companies can turn their investments into revenue.

At the top of the price range, Anthropic would be valued at about $1.4 trillion on a fully diluted basis, which includes securities such as stock options and restricted stock. On a non-diluted basis, excluding those securities, Anthropic's market value would be about $1 trillion.

"Anthropic could become an exceptionally successful company, but at this valuation, much of that success is already reflected in the price," said Varun Datta, venture capitalist and founder of Truth Ventures.

Anthropic filed an updated prospectus on Tuesday. Late on Monday, details of its IPO were briefly circulated to investment banks before being retracted, according to emails seen by Reuters.

The preliminary terms showed Anthropic's IPO could raise as much as $69.3 billion. But the updated prospectus filed with the US Securities and Exchange Commission contained different terms, including a lower price range and a reduced target for proceeds.

"By seeking a valuation close to 20% below 'market expectations', this allows investors to 'bid up' the IPO rather than facing a take-it-or-leave-it scenario like SpaceX took," said Jeff Zell, senior research analyst at IPO Boutique.

Big Spend Concerns

Investors are also watching Anthropic’s IPO for clues about rival OpenAI, which is seeking to raise $30 billion in what is expected to be its final private funding round before a potential IPO early next year.

Anthropic's prospectus spoke of a vision to "bring forth an age of miracles," even as it warned of existential risks to humanity. Both adherents and critics of AI have often described its potential merits or dangers in either lofty or apocalyptic terms.

The document also outlined a range of risks facing both the company and the technology, warning that competitors could gain an edge by developing models faster and that advances in AI could outpace Anthropic's ability to put adequate safety and security measures in place.

Growth comes with risks

AI-related stocks have sold off of late due in part to expectations that greater oversight and potential regulatory hurdles could complicate the AI boom's infrastructure build-out.

Anthropic's growth has so far defied those concerns, propelled by surging demand for its products, particularly its viral Claude models.

Anthropic's run-rate revenue was roughly $81 billion as of October 31, up $10 billion from September 30, according to the IPO filing.

The company has nearly $900 billion in computing commitments with partners including Amazon and Alphabet's Google, highlighting how its rapid growth depends on securing vast amounts of future computing capacity, some of which relies on financing beyond the company's control.

Together with investments from cornerstones, which include Broadcom, Micron Technology, Microsoft and TSMC, Anthropic's share offering will raise up to $90.4 billion.

Certain Anthropic board members and entities related to them are set to buy up to $303 million of shares.

Anthropic was last valued at $965 billion in a private funding round. It was founded in 2021 and is led by CEO Dario Amodei.

Goldman Sachs and Morgan Stanley are the leading underwriters on the offering.