The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
NEW YORK, Sept 23 (Reuters Breakingviews) - Anthropic's initial public offering matters well beyond the $2 trillion valuation it hopes to fetch. Yet that listing may again be delayed until after US elections in November, Reuters reported on Friday. A successful launch matters not just for boss Dario Amodei, but for industry titans like Alphabet GOOGL.O and Amazon.com AMZN.O, who depend on the AI lab’s promises to spend over $500 billion on computing power.
For Amodei, going public right now might not seem existential. Despite some recent deceleration, a $100 billion revenue run-rate still looks within reach this year, Breakingviews calculates. That should help sustain red-hot demand in private markets for its equity. The company also had as much as $130 billion of cash as of early August, according to The Information.
Staying private might be expensive, though. Training and serving large-language models devours capital. Public equity markets offer a deep, accessible source of it. Anthropic and arch-rival OpenAI have turned to a host of partnerships and finicky structured financings in the meantime. Yet even partners like Alphabet’s Google, which agreed to invest up to $40 billion in Anthropic in April, are showing signs of strain.
The cost of insuring Alphabet’s 5-year debt against default has climbed to record highs, LSEG data shows. Efforts to offload debt tied to a partnership between Oracle ORCL.N and OpenAI have hit snags, the Financial Times reported. More broadly, these Big Tech firms now heavily expose their investors to the cutting-edge chatbot labs. Paper gains on investments in SpaceX SPCX.O and Anthropic accounted for half of the $280 billion increase in S&P 500 companies’ net profit in the second quarter.
Meanwhile, promises of ever-swelling future revenue are based on vast commitments from the AI developers. Just tot up some of the deals that Anthropic has signed: there’s an agreement to spend $100 billion on Amazon’s cloud services; a $200 billion pact for chips and servers with Google, the Information reported; a $45 billion deal with smaller “neocloud” Nscale. Together with other announcements, it crosses the half-trillion-dollar mark.
The story is similar with OpenAI, which Microsoft MSFT.O said earlier this year accounted for 45% of its demand backlog. Yet much of the terms of these agreements remain undisclosed. Investors are being asked to take a lot on faith, even as Big Tech’s free cash flow disappears into data-center spending.
If Anthropic keeps delaying or nixes its IPO, that faith may well be shaken. Finally disclosing the economics underlying this massive boom is chance for a public-market audit of what has been largely private fervor. There’s a lot more on the line than just one lab’s debut.
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CONTEXT NEWS
Anthropic could push its initial public offering to after the November US midterm elections, with the elections not expected to have a major impact on the offering, Reuters reported on September 18 citing two people familiar with the matter. The IPO has already been pushed back from earlier plans, with Reuters previously reporting that marketing was expected to begin in mid-October at the earliest.
(Editing by Jonathan Guilford; Production by Maya Nandhini)