Anthropic’s $1.4 trillion question, Jensen Huang deals with Washington

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Christine Mui (0:33)

Hello, and welcome to Decoded by POLITICO. I'm Christine Mui.

Sam Sutton (0:37)

And I'm Sam Sutton. Today on the show, Anthropic has started to market its IPO and its valuation is looking like it could hit $1.4 trillion.

It may make its public debut next week. We'll tell you everything you need to know about the Frontier Labs opening day.

Christine Mui (0:50)

Plus, we'll discuss Nvidia's future with the Trump administration, which has repeatedly downplayed the allegations against the company's CEO and his affair with a suspected Chinese spy. You'll hear an exclusive clip from Alex Karp, the CEO of Palantir, on his view of the situation.

Sam Sutton (1:08)

All right. So Christine, you're playing my usual role today and getting to talk a little bit about markets. What can you tell me about Anthropic's IPO plans?

Christine Mui (1:16)

Yeah, Anthropic is moving ahead with plans for an IPO, and it announced today that it's targeting a valuation of approximately $1.4 trillion.

That valuation is significant, of course, but so is the fact that it's below earlier expectations. So some investors had previously discussed a valuation as high as $2 trillion.

That would have exceeded the record-setting IPO from Elon Musk's SpaceX SI earlier this year. In June, Musk's company completed the biggest IPO in history, and it raised $75 billion.

But I think that downward revision for Anthropic reflects a broader shift in investor sentiment toward AI stocks which have been tracking SAM and the recent uncertainty about the industry's political outlook following the midterm election. So AI stocks were getting hit last week, as investors were worried about the cost of building out infrastructure and just rising political pushback against data centers in light of the recent election results. And the market, of course, has also been affected by recent uncertainty surrounding Nvidia, which announced an investigation this weekend, and to CEO Jensen Huang's affair for suspected Chinese intelligence operative. So that's the backdrop against which Anthropic is pushing ahead. It would become the first frontier AI lab to go public. And shares could reportedly begin trading as soon as next Thursday. And I think, you know, Anthropic's IPO is going to be like an important test of investor appetite for these very large capital intensive AI businesses. $1.4 trillion, like that's a huge sum. And that's still going to come with considerable expectations for its future revenue growth and also its ability to expand its market share.

Sam Sutton (2:57)

Yeah. And beyond that, I think the thing that's interesting to me was some of the private placement component of this pending listing. Can you tell me a little bit about some of the big tech players that are getting involved with this deal?

Christine Mui (3:07)

Yeah, that stood out to me too. So Anthropic is looking to raise as much as $90 billion through this offering and $26 billion of that would come from private share sale with seven major tech companies. Those are Google, AMD, Microsoft, Broadcom, Micron, TSMC and Nvidia. These aren't like your ordinary institution investors. They're also key players in the AI ecosystem. They supply much of the technology that Anthropic needs to build and run its AI models. Or they have business partnership with the stake in Anthropic's future in other ways. And to be clear, it doesn't mean that there's necessarily anything wrong with its arrangement. These companies may have legitimate strategic reasons to want Anthropic to succeed, and we don't know if these investment proceeds means that it would just flow back to the same suppliers. But I think circular financing and concerns about the same companies investing into each other in the AI ecosystem has been a source of concern for some time. And I'm sure it's going to give Anthropic and AI skeptics and ammunition. We may see them raise questions about how much AI investment is circulating within the same group of companies, how sustainable the AI boom really is. Investors are probably also going to want to dig into how much of that demand is supported by independent commercial activity and how much of it depends on, again, that same ecosystem.

Sam Sutton (4:26)

Given the size of this IPO and given the fact that it's going to be an event that's going to expose everyone or almost everyone with their environment account or investment portfolio to an Anthropic moving forward, is something that I know that a lot of folks on the Hill are definitely paying attention to.