Is the AI wheel broken? Julius Baer flags 3 variables shaping AI investments ahead of Anthropic IPO

The proposed listing of artificial intelligence (AI) company Anthropic is set to offer public market investors a closer look at the economics of the frontier AI industry, with "demand growth, intelligence prices, and compute capacity commitments" emerging as the three key areas to watch, according to Enrico Chinello, Next Generation Research Analyst at Julius Baer.

In a note titled Artificial intelligence: Anthropic IPO, a trillion-dollar reality check for AI, Chinello said that while Anthropic's proposed valuation is substantial, it remains "well below the $ 2 trillion reported earlier this year by the press". He said the listing would give public markets "a first full look at frontier artificial intelligence economics".

Anthropic, the maker of the Claude chatbot, is marketing its IPO shares at $70-$78 apiece, implying a fully diluted valuation of between $1.1 trillion and $1.4 trillion. The company is looking to raise up to $64 billion through the base offering, with the total fundraising target rising to around $90 billion, including a $26 billion private placement with chip and cloud partners.


According to Chinello, the proposed valuation is also below the $1.5 trillion-$2 trillion target range reportedly indicated earlier this autumn. Pricing is expected on November 18. At the top end of the proposed price range, the valuation works out to roughly 21 times the company's 2026 annualised revenue run-rate, based on Chinello's calculations.

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As investors await the public market reaction to Anthropic's listing, Chinello identified three areas that are "top of mind" for AI investors: demand growth, pricing power and capital intensity.

1. AI demand and enterprise adoption

On demand, Chinello said "all indicators signal continued strength", suggesting that "enterprise adoption is real and broadening".

He added that this continued adoption "supports the scale of AI investments", making sustained demand growth an important variable for investors assessing the industry's expansion.

2. Pricing power amid falling intelligence costs

The second area is pricing power. Chinello noted that "cheaper models from American and Chinese competitors have pushed the average intelligence cost down".

This puts pressure on AI companies to increase usage volumes to offset falling prices. "Volumes must keep outrunning price deflation to continue to post revenue growth," he said.

The ability of AI companies to sustain revenue growth amid declining model prices will therefore remain a key consideration for investors.

3. Computing costs and capital commitments

The third variable is capital intensity. Chinello said AI model providers have "generally signed large compute capacity agreements", with these commitments "predicated on impressive revenue growth to sustain these expenses".

The scale of these commitments makes revenue growth critical to supporting the industry's computing requirements and infrastructure spending.

Chinello also flagged the political dimension of the AI investment debate, saying regulators would need to strike a balance between "potentially stricter data centre regulation" and the need to "continue to support AI as a national strategic priority". He said this introduces "another complexity to the debate".

Anthropic's growth and valuation under the spotlight

Anthropic has demonstrated formidable growth, with revenue reaching $33 billion in the first nine months of the year, a 13-fold annual increase, according to the Julius Baer note.

The company's annualised revenue run-rate is on track to reach $65 billion-$67 billion this year. At the top end of the proposed IPO price range, the valuation equates to roughly 21 times the 2026 annualised revenue run-rate, based on Chinello's calculations.

Anthropic IPO could set benchmark for OpenAI

For investors, Chinello said the deal would set "a public, market clearing price for frontier AI", while also establishing "an expectation baseline for OpenAI's listing expected in 2027".

The proposed valuation range, which is below earlier reported expectations, does not necessarily mean the AI growth story is faltering, according to the analyst.

"The target valuation range below prior indications, in our view, does not mean the AI wheel is broken, but it signals that markets are starting to discriminate between growth and returns," Chinello said.

"We believe these are healthy developments, which could contribute to better re-alignment of what is a sustainable, long-term growth trajectory for the AI ecosystem," he added.

Julius Baer said it remains "constructive on the Cloud Computing & AI theme".

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here