Anthropic's IPO valuation has an identity crisis

Space Exploration Technologies

Yesterday 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
NEW YORK, Nov 10 (Reuters Breakingviews) - Anthropic's initial public offering is a referendum on what kind of company it is becoming. At the top of a proposed price range unveiled on Tuesday, its equity would be worth $1 trillion, rising to $1.4 trillion on a fully diluted basis. That’s a retreat from a once-mooted $2 trillion, reflecting market turbulence and the urgency of raising capital. Even so, boss Dario Amodei’s vision depends on chatbot Claude becoming a ubiquitous platform rather than just an impressive collection of servers.
The AI lab is probably going to grow revenue more than tenfold this year. Assume that expansion thereafter slows but remains remarkable for its size: sales rise 176% to $150 billion in 2027, reach $249 billion in 2028, then grow more gradually to $556 billion in 2031. If operating margin rises to 27% over that period — comparable to what analysts foresee for data-center builders such as CoreWeave CRWV.O, according to Visible Alpha — then operating income would hit $150 billion, Breakingviews calculates. 
What matters is how investors value such figures. Right now, they are hopeful projections for a decidedly capital-intensive business. Filings disclose $900 billion of future spending commitments on chip-stuffed data centers to serve and train Claude, with yet more carrying a still-uncertain price tag. 
The cynical case is that large language models will become more-or-less interchangeable as rivals constantly nip at Amodei’s heels. Anthropic’s huge infrastructure would be remarkable but fundamentally similar to neoclouds CoreWeave or Nebius, which trade at about 0.7 times expected 2031 revenue, per Visible Alpha data.
Optimists might see Claude as not merely a model, and vast spending on servers as more than science experiments. Instead, they might forge an integrated suite of infrastructure, workplace software and AI tools, akin to Microsoft’s Azure and Office 365. The Redmond-based company trades at 5 times its anticipated sales in five years.
In between is Elon Musk’s SpaceX SPCX.O, a mish-mash of AI aspirations and other businesses, valued largely on amorphous potential. Average across these outlooks and you get a multiple of about 2 times, implying a value for Anthropic of $1.1 trillion.
On that basis, Tuesday’s unveiled target is a cocktail of hopes and fears about AI. Assuming, that is, near-unprecedented growth. There are other snags. Microsoft MSFT.O generates a juicy operating margin of 47%, far beyond what seems plausible for Anthropic barring vast efficiency improvements. Meanwhile, the recent market rout reveals nagging fears that the chatbot craze could fizzle.
This listing’s importance in sustaining that momentum is reflected in the host of tech giants, from Alphabet GOOGL.O to chipmaker Nvidia NVDA.O, agreeing to support it with an incredible $26 billion private placement. Including insider sales and underwriters’ overallotment option, the overall haul could total $100 billion. Claude’s peers, at least, still attest to its worth.
     
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CONTEXT NEWS
AI lab Anthropic disclosed an updated prospectus for its anticipated initial public offering on November 10. At the top of its proposed price range, the company would be worth $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, the company’s market value would be about $1 trillion. 
The AI lab is aiming to raise up to $64.4 billion by selling 825 million shares in the IPO priced at up to $78 per share.
Anthropic will also raise $26 billion via a separate private placement deal with ‌cornerstone investors such as Alphabet's Google, Nvidia, and Advanced Micro Devices.
Goldman Sachs and Morgan Stanley are leading the IPO.

(Editing by Jonathan Guilford; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))