Should Anthropic delay its IPO? Stock market turmoil raises questions over $1.5 trillion valuation as AI spending slows

Anthropic IPO: Anthropic's much anticipated IPO is approaching at a time when investors are having second thoughts about the artificial intelligence boom. A sharp sell-off in US stock market has made investors more cautious about technology stocks and signs of slower corporate AI spending are adding to concerns about the industry's growth prospects.

The company behind Claude had been attracting valuation expectations of around $1.5 trillion but that figure is now facing scrutiny. Some prospective investors are discussing a valuation closer to $1.2 trillion to $1.3 trillion and others believe Anthropic may need to come down to around $1 trillion to attract buyers.

The changing mood raises an important question, should Anthropic proceed with its November IPO or wait until the market becomes more favorable?

Anthropic IPO Faces Valuation Pressure as Wall Street Sells Off

Anthropic's valuation expectations have changed considerably over the past few weeks. The company had attracted discussions of a valuation as high as $2 trillion in early October, before expectations moderated to around $1.4 trillion to $1.5 trillion.

The latest market turmoil has added another complication.

As per Bloomberg report, some prospective investors are now discussing a valuation of $1.2 trillion to $1.3 trillion. Other investors believe a figure closer to $1 trillion may be more appropriate.

The concerns come after a steep technology stock sell-off on Thursday. The Nasdaq 100 plunged 6.4%, marking its biggest single-day decline on record.

This has made the timing for Anthropic IPO particularly difficult. Investors who were previously willing to consider an enormous valuation are now reassessing how much they would pay for the AI company.

No final IPO valuation has been confirmed and the figures being discussed remain investor estimates.

Should Anthropic Delay Its November IPO

Anthropic was expected to begin its investor roadshow during the week of November 9 and its IPO pricing potentially following the week after.

But the latest market volatility has raised questions about whether the company should stick to that schedule.

As moving ahead could mean accepting a lower valuation or offering investors more attractive pricing and waiting could give the market time to stabilize. However, there isn't any guarantee that investor sentiment will improve quickly.

Mike O’Rourke, chief market strategist at JonesTrading, told CNN “My view is that Anthropic can still come to market and will come to market [but] will likely be forced to do so at a lower valuation.”

The company hasn't announced that it is withdrawing/ postponing its IPO.

Corporate AI Spending Slows as Anthropic Prepares for IPO

Wall Street's weakness is not the only issue attracting investor attention. Latest data from financial technology company Ramp suggests that corporate spending on AI has lost some momentum.

According to TechCrunch, AI token spending increased just 1.5% across August and September, compared with 42% month over month growth in July.

There was a recovery in October, with spending rising 8.9% between September 23 and October 23. Still, the earlier slowdown has raised questions about how quickly businesses are increasing their AI budgets.

Ramp's lead economist, Ara Kharazian, told TechCrunch that some of the biggest AI spenders had also reduced their spending slightly after reaching summer peaks.

The top 1% of companies had been spending close to $10,000 per employee each month, but their spending eased in August and September.

AI Price Cuts Make Revenue Growth Harder to Predict

Businesses are also finding ways to use AI without spending as much money.

OpenAI and Anthropic have reduced prices. While enterprise discounts have made AI services more affordable. Companies are also becoming more selective about which models they use, directing simpler tasks toward cheaper alternatives.

Kharazian told TechCrunch that, “As you get really advanced in using AI, you get better at figuring out how to control it.”

The economist explained that, “A lot of the assumptions that we had about the trajectory of AI spend are starting to break down,” adding, “You can use more AI, but use it for less. That’s great for the customers…but it’s not necessarily great for the model companies. And it does introduce new questions around their revenue trajectories.”

Anthropic IPO: Is a Lower Valuation Better Than a Market Delay

Anthropic now faces a difficult decision as it approaches its expected IPO timetable. Proceeding in the current environment could require a lower valuation. While delaying the offering would give the company more time to assess investor demand and market conditions.

The spending data adds another concern for potential shareholders. Investors must consider whether the growing use of AI will translate into spending and revenue growth strong enough to support the valuations being discussed.

But the October improvement in Ramp's figures also shows that corporate AI spending has not simply continued to decline.