Anthropic's $1.5 trillion IPO in trouble? Investors see valuation falling to $1 trillion after AI selloff

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Anthropic's plans for a $1.5 trillion initial public offering (IPO) are facing resistance from major investors following a sharp selloff in US technology stocks, with some prospective backers pushing for a lower valuation and others questioning whether the listing should proceed as scheduled, The Wall Street Journal reported.

Three major investors intending to participate in the offering believe the proposed valuation will need to be reduced, according to the report. One investor suggested the artificial intelligence company's valuation could be closer to $1 trillion, about $500 billion below earlier expectations.

The company has been targeting a listing in the week before Thanksgiving, with plans to raise as much as $100 billion. At that size, the offering would surpass the record set by SpaceX's IPO in June.

However, the recent market turbulence has complicated those plans.

Could Anthropic scale back or delay its IPO?

According to the WSJ, one prospective investor questioned whether institutional investors would be willing to increase their exposure to AI companies so soon after suffering losses in the sector, even if markets recover.

That investor raised the possibility of postponing the offering.

Another investor suggested Anthropic could reduce the amount it seeks to raise to around $80 billion instead of the previously anticipated $100 billion.

Anthropic held $146.6 billion in cash as of September 30, according to the report. One investor said they hoped the company's cash balance would exceed $200 billion following the listing.

Company executives and advisers are expected to meet in the coming days to review the IPO plans. According to people cited by the WSJ, Anthropic has avoided making firm commitments on the offering's structure and timing.

Reuters separately reported that potential investors were questioning whether Anthropic could proceed with its planned roadshow in the week beginning November 9. Anthropic declined to comment to Reuters.

The $2.5 trillion selloff and changing investor appetite

The uncertainty follows a sharp retreat in AI-related stocks, with companies in the Nasdaq Composite losing a combined $2.5 trillion in market value on Thursday, November 5, according to the WSJ.

The decline came two days after US midterm elections in which several candidates critical of AI expansion gained power, while voters also approved restrictions that could affect data centre development.

The WSJ reported that investors had previously regarded Anthropic as a highly sought-after IPO candidate, despite volatility in other AI-linked stocks.

The company's business relationships with technology groups including Google, Amazon and Nvidia have also drawn attention to the proposed listing.

Investor caution was evident even before the latest selloff.

Anthropic's rival OpenAI has secured approximately $11 billion against an initial $30 billion fundraising target, the WSJ reported separately. The financing values OpenAI at $1.25 trillion, below its earlier target of $1.4 trillion.

For Anthropic, the final valuation, offering size and listing date remain undecided, according to the reports.