Anthropic's Public Offering: A Test of AI Hype
The city of San Francisco was abuzz with tech-related activity during Tech Week, but a few blocks away from the excitement, a more subdued atmosphere prevailed. On Wednesday night, a crowd gathered in the Dogpatch for the Tech Insider: Growth Mode event, sponsored by Fidelity.
At this gathering, Business Insider’s chief correspondent Ben Bergman posed an intriguing question to the room: Would investors be willing to buy shares of Anthropic at a valuation of $3 trillion when it goes public? The response was surprisingly muted, with only three hands going up in support.
The prospect of Anthropic’s initial public offering (IPO) has been highly anticipated, and its success will serve as a litmus test for the artificial-intelligence gold rush. However, the hype surrounding AI companies may be about to face some scrutiny from the public markets.
Anthropic is not alone in its plans to go public; SpaceX’s blockbuster debut earlier this year propelled the IPO market to one of its biggest on record. Nevertheless, beneath the surface lies a more complex reality: there have been relatively few offerings, and several high-profile candidates have stumbled recently.
One such example is Oura, a smart-ring maker that pulled its planned IPO at the last minute due to ‘choppy market conditions.’ Heidi Mayon, a partner at Simpson Thacher who worked on Oura’s offering, attributed this decision to a wait-and-see attitude among companies. She noted that many are hesitant to go public before Anthropic and OpenAI do.
According to Mayon, there is an overarching feeling in the market that there isn’t enough public investor capital available until these deals get done. However, she pointed out that SpaceX’s success may have dispelled this notion, but few companies want to compete with AI model providers for investor attention.
The bigger challenge facing companies, Mayon said, lies in the extremely high valuations of private markets driven by artificial intelligence. Rather than squeezing every possible dollar from an offering, some firms might be better off pricing their shares more conservatively. This approach could leave room for a first-day ‘pop’ and momentum.
Jack Cassel, Nasdaq’s senior vice president and head of new listings, offered a different perspective: there is still plenty of capital available to take companies public, but the bar has changed. After years of prioritizing growth above all else, investors are now seeking ‘growth with cash efficiencies and discipline.’
Cassel emphasized that investors are asking tougher questions about business models, product plans, and what comes after a stock launch. This increased scrutiny may keep consumer and software companies on the sidelines until one or both of the frontier labs go public.
Interestingly, other corners of the market remain active. Biotech has produced 22 IPOs this year, with more expected before the end of the year. When Anthropic finally goes public, it will be the biggest test yet of whether AI hype can translate into financial success.