Anthropic's highly anticipated initial public offering is encountering significant headwinds as a sharp selloff in artificial intelligence stocks prompts investors to question the company's proposed $1.5 trillion valuation and the timing of its listing. The AI firm, which is preparing to go public as early as November, had been expected to target an offering of around $100 billion.
However, prospective investors are increasingly skeptical about whether the proposed valuation aligns with the company's financial outlook, particularly given its substantial commitments to computing infrastructure. The market backdrop has also deteriorated, with an unwinding of AI-related investments hitting technology stocks and political uncertainty following the US midterm elections raising concerns about the future of data-centre construction.
According to The Wall Street Journal, at least three major investors believe Anthropic may have to lower its valuation, with one suggesting a figure closer to $1 trillion. The growing resistance presents a challenge for one of the most closely watched IPOs in the technology sector, as Anthropic must balance investor expectations against its substantial funding requirements while continuing to expand its Claude AI models and secure computing capacity.
Valuation Debate Intensifies
The proposed $1.5 trillion valuation has emerged as a major sticking point in Anthropic's IPO preparations. Investors who previously viewed the company as a must-own name are becoming more cautious as technology stocks come under pressure. The Wall Street Journal reported that three major investors planning to participate in the offering believe Anthropic will probably need to reduce its valuation, with one suggesting the company could be worth closer to $1 trillion.
The company may also have to settle for a smaller fundraising target, potentially seeking around $80 billion rather than the previously anticipated $100 billion. The valuation debate comes as investors await further details about the company's financial performance. Anthropic's amended S-1 filing showed that its revenue reached $17 billion in the third quarter, and its revenue run rate exceeded $80 billion at the end of October, according to The Wall Street Journal.
However, investors are also looking beyond revenue growth to examine the costs associated with developing and operating increasingly sophisticated AI models. Reuters reported that some prospective investors are waiting for Anthropic's October financial results before pushing for a lower valuation. The company's October revenue figure was left blank in its updated S-1 filing, making it another important number for investors to assess. The roadshow was initially expected to begin during the week of November 9, with pricing anticipated the following week.
AI Selloff and Data-Centre Concerns
The deteriorating market environment has added another layer of uncertainty to Anthropic's listing. A sharp selloff in technology stocks has raised questions about whether investors will be willing to support a $1.5 trillion valuation for an AI company at a time when enthusiasm around the sector is weakening. The Global X Artificial Intelligence & Technology ETF fell 6.2% during Thursday's session, reflecting the pressure on AI-related investments.
The political environment has also become more complicated. Democratic victories in the US midterm elections have raised concerns about potential resistance to new data-centre developments. Newly elected Democratic governors in states including Texas, Georgia and Ohio could create obstacles for construction projects. Analysts at Jefferies cut their forecast for new data-centre capacity in 2030 by approximately 8% in a research note on Thursday.
This matters considerably for Anthropic because its business strategy depends on securing sufficient computing capacity to train and operate its Claude models. In its IPO prospectus, the company acknowledged that political or financial developments that restrict data-centre capacity could pose a risk to its operations. However, Malik Ahmed Khan, senior equity analyst at Morningstar, does not believe the current market weakness will derail the IPO. "We don’t expect any near-term impact on the IPO," Khan wrote in a research note on Thursday, adding that concerns surrounding data-centre development could become an interesting dynamic to watch over the next couple of years. He also argued that developers could respond to local opposition by making greater investments in communities and introducing commitments to protect residents from rising electricity bills. The continued presence of President Donald Trump in the White House could also make federal legislation restricting AI development more difficult, he added.
Michael Burry's Concerns
While the market selloff has raised concerns about Anthropic's valuation, the company's spending commitments have become another major source of investor scrutiny. Michael Burry, the investor known for his bets against the US housing market before the 2008 financial crisis, has expressed reservations about participating in Anthropic's IPO. In a Substack post on Wednesday, Burry highlighted the company's amended S-1 filing, particularly its commitments to spending on computing infrastructure. The filing revealed that Anthropic has committed approximately $895.4 billion towards AI computing power, chips and other infrastructure required to develop and operate its models.
Burry's skepticism underscores the broader investor unease about the capital intensity of AI development. As Anthropic navigates these challenges, the outcome of its IPO will be a key test for the AI sector's valuation expectations. The company must convince investors that its growth prospects justify the hefty price tag, even as market conditions remain volatile.
This article is for informational purposes only and does not constitute financial advice.
