Anthropic Might Be Worth ‘Only’ $1.5 Trillion. Why It Isn’t a Disaster for the AI Trade.

Anthropic is expected to launch its initial public offering in November. (Dreamstime)

Key Points

• Some potential Anthropic investors want to cut the startup’s IPO valuation target to $1.5 trillion from $2 trillion, according to Reuters.
• The push for a lower valuation follows apparently decelerating growth for Anthropic in the third quarter.
• A reduced valuation could raise questions about whether Anthropic can fund all of its spending commitments.

It’s a tough time when $1.5 trillion isn’t enough to satisfy the market. Artificial-intelligence start-up Anthropic might become a victim of high expectations for its initial public offering, but that doesn’t spell the end of the AI trade.

Some would-be Anthropic investors are nervous about the much-hyped $2 trillion valuation target for its IPO after reports that growth decelerated in the third quarter. They would like to cut half a trillion dollars off that figure, according to a Reuters report late Thursday, which cited sources familiar with Anthropic’s investor day discussions.

A reduced valuation would be painful for Anthropic and raise questions about whether it can fund all its spending commitments. *Barron’*s previously called the $2 trillion IPO target as a “risky bet.” Anthropic didn’t immediately respond to a request for comment Friday.

But a downgraded IPO size isn’t necessarily a reason to panic. The key question now is why Anthropic’s growth has slowed, and what is says about overall AI spending. Is it because businesses are pulling back on AI altogether, or are they shifting to other providers or cheaper options?

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OpenAI launched its Astra model in early September. That could be one culprit for a slowdown in Anthropic’s growth. That’s the best-case scenario for AI-related stocks, as OpenAI’s $1.4 trillion in spending commitments are even larger than Anthropic’s. It’s a similar story if Meta Platforms is winning a bigger share of spending. As long as the overall pie keeps growing, Anthropic having a smaller slice isn’t an issue.

There are, however, more worrying possibilities. The most concerning theory would be that businesses are giving up on AI. But consumption of tokens—the basic unit of AI—tells a different story. OpenRouter, a start-up that helps developers route requests to various AI models, puts the weekly rate at 172 trillion tokens as of last week, up from 46.7 trillion at the end of June.

A more likely explanation is that open AI models—which are generally lower cost as they can be adapted for efficient use—are playing a bigger part in the market overall. Along with more efficient hardware, that drives down the cost of tokens overall.

But what’s bad news for OpenAI and Anthropic—who spend billions to develop their so-called frontier AI—could be good news for the rest of the sector. Big cloud operators such as Amazon.com , Microsoft , and Alphabet’s Google don’t have to share the revenue for hosting open models, while benefiting from the growth in token consumption.

“Open-source tokens generate more revenue and profit for the hyperscalers/neoclouds than frontier tokens,” Gavin Baker, chief investment officer of hedge fund Atreides Management, wrote on social-media platform X on Thursday. “*Every* open source inference cloud I am aware of is growing faster…than either Anthropic or OpenAI.”

That logic can be taken too far. No one in the U.S. AI trade wants to see Anthropic or OpenAI’s IPOs flop altogether—they are still huge sources of spending on cloud computing, chips, and networking gear. And the open AI model ecosystem is dominated by Chinese providers, despite Meta and Nvidia’s recent efforts to correct that.

Still, a scaled-back Anthropic IPO doesn’t have to mean an AI bubble is bursting, so long as overall spending holds up. And after all, $1.5 trillion for a company that didn’t even exist six years ago is still pretty good.

Write to Adam Clark at adam.clark@barrons.com

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