AI valuations diverge further! Anthropic IPO: Silicon Valley's frenzied bids reach $2 trillion, while Wall Street's sober assessment is only $1.5 trillion.

AI valuations diverge further! Anthropic IPO: Silicon Valley's frenzied bids reach $2 trillion, while Wall Street's sober assessment is only $1.5 trillion.

Valuation differences are widening among AI companies going public.

According to a report by tech media outlet The Information on September 30, some investment banks in the venture capital and private equity markets discussed giving Anthropic a valuation of approximately $2 trillion in early communications. However, in the public market, two large investment firms believe a more appropriate valuation would be closer to $1.5 trillion. While Silicon Valley venture capital circles continue to chase the upside potential of AI assets, the Wall Street public market is more focused on cash flow, financing costs, and downside scenarios.

Anthropic is expected to launch its formal IPO roadshow several weeks later. The report states that the AI company was initially considered one of the most anticipated IPOs of the year, but stock market volatility has begun to influence investors' pricing attitudes towards large tech IPOs.

There are two different pricing logics between 2 trillion and 1.5 trillion.

Evan Skorpen, a public markets portfolio manager at Lead Edge Capital, told The Information that venture capital firms typically think, "How much is this company worth in the most optimistic scenario?"

He stated that, under this mindset, "there are a lot of exciting data points in the market."

But public market investors have a different perspective. Skorpen says, "Public market investors can't just think about what will get better because we hold stocks every day. Public market investors are more concerned about what might go wrong."

He summarized this divergence as follows: Silicon Valley investors sit on Sand Dune Road betting on the future, while Wall Street investors stare at stock prices every day considering the risks.

Anthropic has reportedly committed to purchasing at least 14.8 gigawatts of computing power. These agreements could cost over $500 billion over the next decade. Data from Anthropic's draft IPO prospectus, disclosed by Reuters this week, has again drawn investor attention to its financial commitments and risk exposure.

Samantha Lau, chief investment officer of small and mid-cap growth stocks at AllianceBernstein, said: "Right now, any company going public has to be reasonably priced, but I haven't seen that yet."

She said, "The only way to open up the market is to be conservative."

The return on investment in AI has become a core issue in the public market.

Even after completing their IPOs, leading AI companies such as Anthropic and OpenAI are expected to continue to raise funds to cover their expenses on data centers, chips, and computing power.

Lau stated that she is optimistic about the AI agent software capabilities demonstrated by technology companies and recognizes the potential returns on investments in data centers and chips. However, she also pointed out that rising interest rates will increase corporate borrowing costs, and investment institutions need to see tangible returns.

"The problem is, who will pay for this before we reach the final ideal state?" she said.

Anthropic also faces the variable of increased competition.

The report states that OpenAI's latest models are making progress with enterprise customers, and the company is in preliminary talks for a pre-IPO funding round of approximately $30 billion. If the deal proceeds, OpenAI and Anthropic may compete for some of the same funding sources.

Small and medium-sized AI and data center IPOs are the first to feel the pressure.

The cautious attitude towards valuation and financing has affected a number of companies that originally planned to go public soon.

Smart ring company Ofa abruptly postponed its IPO on Tuesday, with the final offering price scheduled for the following day. Sources familiar with the matter said investors felt the company's valuation was too high.

SoftBank's SB Energy has also not yet launched its IPO marketing. The company is building a large facility for OpenAI in Ohio. Sources familiar with the matter said that investment banks are discussing a valuation of around $60 billion, but some IPO investors are currently hesitant to accept that price, with some also concerned about its reliance on OpenAI for revenue.

Market scrutiny of data center companies is also intensifying.

According to reports, London-based "new cloud" company Nscale, which plans to go public, and privately held data center developer Switch, are both facing investor concerns about their high debt levels and future financing needs . Companies such as CyrusOne and Vantage Data Center, owned by Silver Lake, are also expected to seek IPO funding early next year.

"We need situations like this to remind investment banks and private equity sponsors that we are not price takers," said a veteran IPO investor.

Private equity market still trading at high prices

In contrast to the caution in the public market, the venture capital market's enthusiasm for investing in AI companies has not cooled significantly.

The company that developed the AI consumer assistant Instinct announced this week that it has raised $1 billion at a $10 billion valuation just one year after its founding. Its investors include Sequoia Capital, Benchmark, and Coatue.

However, the private equity market itself has also begun to be wary of overheated valuations.

Pat Grady, one of the heads of Sequoia Capital, said in a public presentation to limited partners last week that venture capitalists generally believe that AI companies are improving their capabilities rapidly and have already reached the threshold of "general artificial intelligence," which is still widely debated.

However, he also pointed out: "The valuations are absolutely insane."

Grady stated that some startups, after completing one funding round, quickly move on to the next at a significantly higher valuation, "which is a classic sign of a bubble."

SpaceX's rise could still provide support for large IPOs.

Large IPOs are not without supporting factors.

SpaceX raised nearly $86 billion in the largest IPO in history this June. Since then, its stock price has risen by about 10%, corresponding to a valuation of about $2 trillion, outperforming the market.

This return allows participating investors to profit and provides early investors such as Founders Fund, Valor Equity Partners, and Sequoia Capital with funds to continue investing in the AI field.

For Anthropic, some large mutual funds already held shares at lower prices during the private placement phase, which may make them more tolerant of IPO pricing. Tech companies like Nvidia, Alphabet, and Amazon, as well as existing investors, are also likely to continue providing funding.

Ashley MacNeill, head of equity capital markets strategy at Vista Equity Partners, said that the high valuations in the private market "do not seem to have fully translated into the public market."

She said, "We've had moments like this in history, and we'll have them again. It's just that it's especially noticeable now because of these mega-IPOs in the market."

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