Anthropic faces public backlash and lower valuation ahead of IPO

A shifting IPO landscape

Anthropic is currently preparing for a potential Nasdaq debut in mid-November. This move would make it the first pure-play AI company to enter the public market. The company is navigating a difficult economic environment where the Nasdaq recently saw its steepest drop in 19 months.

Investors have recently adjusted their expectations for the company's valuation. While a $2 trillion target was floated in recent months, current estimates suggest a valuation between $1 trillion and $1.5 trillion. This shift reflects a tougher environment for the company as it seeks to go public.

The company is attempting to balance its growth with a public image of safety and responsibility. CEO Dario Amodei co-founded the firm with researchers who left OpenAI. While Anthropic primarily sells to businesses, its upcoming public listing will inevitably put it in the spotlight alongside its chief rival.

Public distrust and elections

Recent midterm elections showed a clear trend of public disdain for tech billionaires and artificial intelligence. Voters in several states expressed a preference for candidates who advocate for more stringent AI regulations. This sentiment was particularly strong in states like Michigan, Ohio, Texas, and Georgia.

Data center development has become a specific point of contention for local communities. In a recent series of ballot measures, local communities opposed data center-related proposals in 40 out of 41 cases. Many residents are worried about the physical impact of these facilities on their neighborhoods.

An exit poll from NBC News indicated that more than half of voters considered AI data centers a crucial or major factor in their congressional voting. Behavioral scientist Maura Austin told CNBC that people do not want data centers near them if they only serve to help big tech companies profit.

The infrastructure challenge

Anthropic and OpenAI rely heavily on state-of-the-art data centers to train their models and serve their customers. To meet high demand, these companies are trying to build out capacity as quickly as possible. Anthropic disclosed in an amended IPO prospectus that it has committed about $895.4 billion toward compute and infrastructure.

This massive capital expenditure is meeting resistance from the public due to concerns over inflation and high gas prices. Many people fear that these large facilities could lead to higher utility bills, environmental harm, and job losses. For many residents, a proposed data center represents the physical manifestation of their dislike for AI.

The company acknowledged these difficulties in its prospectus, noting that opposition to data center development is becoming more organized. It warned that its public profile could draw specific scrutiny to the projects it is associated with. Executives are now facing an uphill battle to rebuild confidence as they begin providing quarterly financial updates.

Transparency and scrutiny

Becoming a public company will naturally push Anthropic into the limelight. Reena Aggarwal, a professor of finance at Georgetown University, noted that being public inherently increases visibility. Because AI is such a hot-button issue, the company will likely face even more intense scrutiny than it does as a private entity.

However, some market experts believe that public listing could have benefits for the company. Matt Kennedy, a senior IPO market strategist at Renaissance Capital, suggested that public markets require greater transparency. He argued that the company could potentially attract new users through its debut on the public exchange.

Kennedy also suggested that Anthropic should not be treated more harshly than OpenAI simply because it is public. He noted that several private AI companies are already household names. The company's challenge will be managing the 'crisis of trust' that CEO Dario Amodei described in a recent social media post.