Anthropic targets $1 trillion IPO valuation in test of Wall Street's AI fervor

Anthropic's IPO is set to raise as much as $64.4 billion, a regulatory filing showed on Tuesday, in a landmark test of whether Wall Street's faith in the AI boom outweighs concerns over its risks.

The company is targeting a valuation of up to $1.02 trillion, according to Reuters calculations based on the outstanding shares listed in the filing.

Reuters exclusively reported on Tuesday that Anthropic and some of its investors plan to sell shares in an indicative price band of $70 to $78 per share.

The company is launching the roadshow for a historic share sale that is expected to set a benchmark for the sector, following years of hype that have fuelled a massive influx of capital into AI companies.

Anthropic will also raise $26 billion through a separate private placement deal with cornerstone investors, including Alphabet's Google, Nvidia and Advanced Micro Devices, Reuters reported.

Together with investments from cornerstone investors, which include Broadcom, Micron Technology, Microsoft and TSMC, the Anthropic share offering will raise a total of up to $90.4 billion.

Details of the blockbuster deal were briefly circulated to investment banks before being retracted late on Monday, according to emails seen by Reuters.

The second half of the year has brought a reckoning for the AI boom, as investors question whether returns will justify massive spending and mounting debt costs in an elevated interest-rate environment.

Concerns are also rising over the sustainability of the investment cycle, with questions around circular financing arrangements, the risk of infrastructure overcapacity and how quickly companies can turn their AI investments into revenue.

The tech-dominated Nasdaq recorded its deepest one-day drop in 19 months on Thursday, wiping out trillions of dollars in market value amid fears of increased scrutiny of AI, particularly data centre construction, following Democrats' massive gains in the US midterm elections.

Greater oversight and potential regulatory hurdles could complicate the infrastructure build-out underpinning the AI boom.

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

Its filing spoke of a vision to "bring forth an age of miracles", even as it warned of existential risks to humanity, laying bare the extraordinary promise and profound uncertainties at the heart of the AI boom.

Potential investors in Anthropic's highly anticipated IPO were pushing for a more attractive valuation before committing to the offering, with some viewing the recently discussed $1.5 trillion valuation as being at the higher end of expectations, Reuters has reported.

GROWTH COMES WITH RISKS

Anthropic's net loss narrowed in the third quarter as revenue jumped 47% from a quarter earlier to $16.96 billion, although the pace of growth slowed. Revenue had surged 144% in the previous quarter.

The company attributed its breakneck growth to the rapid adoption of Claude, including specialised products targeting industries such as healthcare, financial services and legal services.

The prospectus 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.

The warnings come amid a growing number of incidents involving "rogue" AI agents that have escaped sandboxed environments and breached private company systems, alongside concerns that increasingly capable AI tools could be used by hackers to penetrate protected networks.

Anthropic's ambitions also come with enormous infrastructure costs. 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.

The listing move follows Elon Musk's SpaceX raising $75 billion in the world's largest IPO in June, at a valuation of nearly $1.75 trillion, excluding additional shares purchased by underwriters through the greenshoe option.

Anthropic, locked in a fierce battle for market share with rival OpenAI, was last valued at $965 billion in a private funding round. The company's prominent investors include Altimeter Capital, Dragoneer, Greenoaks and Sequoia Capital.

Anthropic, led by CEO Dario Amodei, was founded in 2021 by a group of researchers who left OpenAI following disagreements over governance and AI safety.

The shares are expected to trade on the Nasdaq under the ticker symbol "ANT" after the IPO closes, which would make Anthropic one of the few major companies to go public this fall, as higher borrowing costs, geopolitical turmoil and rising bond yields weigh on the IPO market.

Goldman Sachs and Morgan Stanley are leading the syndicate of investment banks underwriting the offering.