Rivals, collapsing prices and rising bills: Anthropic’s record US$1t IPO bid faces big questions

Anthropic, the AI startup valued at US$1 trillion, is preparing for a record-breaking IPO but faces significant challenges. In its Wall Street prospectus, the San Francisco-based firm details the risks it anticipates. The first threat is commoditization, with the company warning that the differentiation among advanced AI models may narrow.

Anthropic's entire revenue base relies on its AI tools, unlike their competitors like Google or Meta, which have diverse income streams. Investors have grown uneasy, with the valuation slipping from a projected US$2 trillion in mid-August to the current level. Another concern is the rise of cheaper and open-source AI models, which are closing the performance gap with Anthropic's closed models.

In addition, Anthropic's cost commitments, primarily for rent chips and servers, are locked in and must be paid regardless of the company's financial health, adding to the pressure. The IPO is seen as an "unprecedented test of investor gullibility," according to the research firm New Constructs, as it requires wall-street confidence that may not hold up under the "triple whammy" of falling stock prices, mounting debts, and unrealized revenue.