- 13 minutes ago
Anthropic is eyeing one of history's biggest IPOs while still losing money. With massive AI spending and growing investor concerns, can revenues justify the industry's trillion-dollar bets?
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00:00We begin the day with preparations for one of the biggest stock market debuts in history.
00:05Anthropik, the company behind the AI chatbot Claude, made it official today.
00:10The company says it's going public, an IPO with an initial valuation of around $1.3 trillion.
00:18With this IPO, Anthropik could raise more than $60 billion.
00:23Anthropik plans to list its shares on the Nasdaq later this month, ahead of its main rival, OpenAI.
00:29The company says its revenues are soaring, but it has yet to turn a profit.
00:34And its stock market debut comes amid growing fears of an AI bubble,
00:39with investors increasingly questioning whether the enormous sums being spent on artificial intelligence will ever pay off.
00:47And joining us now is Dennis Dick.
00:49He's a veteran trader and market strategist who has been navigating Wall Street for more than two decades.
00:53Dennis, it's good to see you again.
00:54I want to start with the timing here.
00:56AI stocks have been taking a beating.
00:59Investors are getting nervous.
01:01And Anthropik decides that this is the moment to go public.
01:06Who's drinking the Kool-Aid here?
01:09It's an interesting timing, to say the least.
01:12Like, we look at what happened, obviously, with Jensen Long and NVIDIA this week,
01:16and NVIDIA stock in free fall.
01:18We look at what's happened with the SMH over the course of the last month,
01:21with the semis getting hit, obviously, AMD, companies like Dell, Micron, SanDisk,
01:27some down 30%, 40%, 50% from their all-time highs.
01:30And you scratch your head a little bit and saying, is this the best timing?
01:34Somebody was asking, another trader was asking me this morning,
01:36they said, would you go and do an IPO on Anthropik right now?
01:39I was like, I would wait till next year.
01:41But they want it out there.
01:42And those investment bankers want the money.
01:43Is Anthropik perhaps racing to get through the door before Wall Street slams the door shut?
01:51Well, and again, getting ahead OpenAI.
01:54So I think they want to be first.
01:56Like, it's obviously been chat, GPT versus quad, Anthropik versus OpenAI.
02:01So getting first to market is something.
02:03So I think they probably do fear that if they don't come out this year,
02:07that OpenAI will be first to market.
02:09So they wanted to beat OpenAI here, and they did it.
02:12So that does make sense from that perspective.
02:16I mean, the IPO is going to be next Thursday.
02:18This market, things can change very rapidly in this market, as we can see.
02:22So maybe a week from now, maybe the timing is going to be OK.
02:26But I'm a little bit nervous.
02:27It's going to be fun to trade.
02:28Like, obviously, as a trader, I'm looking very much and excited to be able to trade this.
02:32But from a company perspective here, I'd be nervous.
02:37Like, $1.3 trillion valuation here in this market, where you're seeing a lot of companies
02:43with extreme valuations get hit really hard, it seems like this could go wrong.
02:48Well, is the company, is it worth that much money?
02:53Well, that's the question.
02:55And I mean, probably the most easiest company to compare to is probably SpaceX.
03:02Because they came out, obviously, six months ago, $1.5 trillion, $1.6 trillion valuation.
03:09So similar in valuation, sales similar to like we're looking at Anthropica, $52 billion in sales,
03:15projected to go up to $125 next year.
03:19SpaceX had, I think it was $30,000, projected to go up as well.
03:23So not crazy if you consider story.
03:26And obviously, a new IPO is driven by story.
03:30You can't consider profitability.
03:31You can't look at it with your CFA hat on and say, OK, I'm going to do some math and
03:35crunch the numbers here, because the numbers won't make any sense at all.
03:38But if you can look at projections, like Goldman Sachs may be the best to project this out.
03:43They're saying by 2030, that Anthropica could have over $600 billion in revenue.
03:50And I mean, if you get to a company where it's $600 billion in revenue, $1.3 trillion doesn't
03:54sound that bad.
03:55But when you're talking about a company with currently $52 billion in revenue,
03:58it sounds like it's overvalued.
04:01So I guess it's about execution from this point in time.
04:04If they can get to 2030, and they can get actually over $600 billion in revenue,
04:08then the company may be not that expensive.
04:11Well, that's what investors are paying for then, right?
04:13Is that this hope will turn into actual dollars.
04:19Yeah.
04:20And profitability is a ways off, too.
04:22Like I was trying to look and, you know, obviously looking at projections and everybody's
04:25just projecting.
04:26Cash flow positive, maybe by 2029, Goldman is saying.
04:29But I mean, we've seen this market environment where you've got companies like NVIDIA that
04:34are printing cash, that are, you know, obviously, you know, still doing very well, trading at
04:39a forward multiple of 14 times earnings here now.
04:42And you think, why am I going to go buy a company that's trading 20 or 30 times projected
04:47sales when I can go buy NVIDIA at 14 times earnings?
04:50Obviously, you know, they're concerned with the gents and what's going to happen there.
04:54But I mean, this is not the best environment.
04:57We're not in Kansas anymore.
04:58Six months ago, investors weren't too concerned about valuation.
05:01It's stocks like Nebius that obviously, you know, CoreWeave, you know, that are burning
05:06cash.
05:06But the stock prices kept going up because they were built on story.
05:10It's just not that, you know, we're not there anymore.
05:12Investors are now looking, show me the money.
05:14And they're even selling companies that are making money.
05:17I mean, Micron and Sandisk are printing money right now.
05:19Yet those stocks are still getting sold, too.
05:21So it's a matter of whether the AI story can get hot again or not, because the AI story
05:25right now in this market is ice cold.
05:28Yeah.
05:28Well, you know, you say we're not in Kansas anymore, but getting to Oz is not cheap either.
05:32Anthropic, I was looking at what they've revealed in terms of where their obligations are.
05:37And what is it, $900 billion in computing and infrastructure commitments.
05:43So when you look at those numbers, could the cost of powering artificial intelligence, could
05:48it ultimately become the company, or even AI in general, the biggest weakness?
05:55Yeah.
05:55I mean, we've seen companies that are in a cash burn situation compromise their balance
06:00sheet.
06:01I mean, think about a company like Oracle.
06:03You know, here's a company that was doing very well.
06:05Stock was going up.
06:06And, you know, now they've been spending, some people say, like drunken sailors.
06:10And they've compromised their balance sheet to a point where the stock's fallen 65% from
06:14the highs.
06:15This is not some startup company.
06:16This is Oracle.
06:17So, you know, we've seen, you know, Meta get punished for its excessive spending.
06:21CoreWeave is another one that the balance sheet is compromised.
06:24Investors are concerned now that its excessive spending.
06:27So, I mean, when you have these commitments here, you know, it better come through.
06:31The revenues better come through.
06:32Those commitments are going to look large and looming.
06:34So, I think you make a good point that a lot of things have to go right for this company
06:40to, you know, hold its $1.3 trillion valuation.
06:43And you also fear, like, obviously, this is looking at the underwritten price.
06:46What's the demand going to be?
06:47It's probably going to be strong.
06:49The underwriters are going to support this.
06:50Obviously, the excitement around the hype.
06:52But, you know, and SpaceX was strong off the bat, too.
06:55But then after three or four days, it started to leak.
06:57And now, you know, it's trading back down to that IPO price.
07:00So, you know, hype will take you so far.
07:02But in the end, profits matter.
07:05Anthropics CEO, Dario Amadai, he has warned about the dangers of developing AI too quickly.
07:12And you can imagine that he may be happy to see that the Democrats won big in last week's
07:17midterm elections.
07:18You know, they promised to slow the rollout of AI.
07:21I'm wondering, how does he reconcile his call to be regulated with the pressure to deliver
07:27growth and profits for shareholders?
07:30Wow, that is a tough spot to be like a tough position to be put in here, because if you
07:36think about it, you know, we've all seen the movie Terminator and people talk about, you
07:39know, the bots taking over and Skynet taking over and the end of the human race.
07:44I don't think that's going to happen.
07:45But you do have to be conscious that the tools you're making in a quad, it's very powerful.
07:51And I'm not so worried about the bots killing us, but I am worried about bad actors using
07:55this technology to do bad things.
07:58Because you think about like the hacks, you know, like you think about like, is your crypto
08:02safe?
08:02Like I recently sold all my Bitcoin because I get concerned.
08:05And I was in Bitcoin for a long time, but you get concerned, you start, you know, getting
08:09AI more powerful, quantum technology coming back.
08:13Can they crack the 16 word code?
08:15Maybe.
08:15So, I mean, you wonder like hacking going forward is going to, you know, accelerate, you know,
08:21obviously spam is one thing, but, you know, hacking in and stealing your money is quite
08:24another.
08:25So, I'm not so concerned about the end of the human race, but I am concerned about disruptions,
08:31you know, potentially from bad actors.
08:32So, I think that's the main concern for me is like, who is using this technology?
08:37It's going to be a lot of good people using the technology.
08:39There's going to be bad people using it as well.
08:41So, we need those safeguards put in place.
08:43We need maybe those speed bumps in place just to make sure that we are developing this
08:47technology with safeguards in place.
08:50Well, I'm glad to hear that we're not going to head for the apocalypse.
08:54At least that's the word according to Dennis Dick.
08:56Dennis, as always, I hope not.
08:58I hope not too.
08:58Yeah.
08:59Good talking with you.
09:01Thank you so much.