Goldman Sachs looks to cash in on big IPOs twice. Anthropic’s historic deal is its next chance

Anthropic, the company behind the popular Claude chatbot, is set to embark on a massive IPO that has investors buzzing with excitement. While the prospect of such a high-profile listing can create a sense of FOMO (Fear Of Missing Out) among investors, it is crucial to remember that excitement alone should not drive investment decisions. Head of wealth advisory at OCBC, Chez Anbu, emphasizes that investors should focus on the fundamentals of the company rather than getting caught up in the hype surrounding the IPO.

Anthropic has been generating significant buzz, with its IPO potentially raising up to US$64 billion and targeting a valuation of up to US$1.4 trillion. The company's Claude model is widely used by individuals, businesses, and government agencies, which may make it seem like a promising long-term investment. However, it is essential to remember that familiarity with a product does not equate to understanding the investment.

Past technology revolutions have shown that even pioneering companies can struggle to maintain their market leadership. Examples include Netscape, AltaVista, Facebook, and Alibaba. These companies may have been early movers, but they did not always capture most of the value created by the subsequent market growth. Similarly, generative AI is a rapidly evolving field where it is uncertain whether today's leaders will retain their positions.

Investors should approach the Anthropic IPO with caution, considering the company's financial performance and risks. For instance, while revenue grew from US$17 billion in the second quarter to US$17.5 billion in the third quarter, expenses increased significantly, and the adjusted operating margin narrowed. Additionally, the company's co-founders hold a substantial voting power, meaning public investors have limited influence over important decisions.

To make informed investment decisions, investors should research the company's financials, understand the risks involved, and recognize their biases. It is essential to evaluate how the investment fits within their existing portfolio and avoid overexposure to the same investment theme. By focusing on the fundamentals and avoiding the hype, investors can make more rational choices and potentially avoid the disappointment that can come with FOMO-driven investments.