Anthropic may delay or lower its $1.5 trillion IPO valuation

Market sentiment shifts

Anthropic is currently navigating a complex path toward its initial public offering as the broader technology market experiences a sharp selloff. According to reports from AFP, some major investors are now signaling that the company's ambitious goals may need to be adjusted. This shift comes as the enthusiasm surrounding the AI trade begins to face significant headwinds.

One investor told The Wall Street Journal that the company's valuation could end up closer to $1 trillion rather than the $1.5 trillion target it had previously aimed for. Another investor suggested that the company might postpone the listing entirely. These views represent the sentiment of major players before the official pricing takes place.

The company has not yet officially set a price range, a share count, or a specific raise amount. While the roadshow was tentatively planned for the week of November 16, the timing remains in question. These uncertainties reflect a cautious atmosphere where the high expectations of the past year are meeting a more difficult economic reality.

The impact of the selloff

The pushback from investors follows a period of intense volatility in the stock market. On November 5, companies in the NASDAQ Composite lost a total of $2.5 trillion in market value. This sudden drop caused the CBOE Volatility Index, which serves as a fear gauge for Wall Street, to jump from 16.61 to 28.18 in a single session.

The Invesco QQQ Trust, which tracks the Nasdaq-100, saw its value drop by 8% over the past week. While it managed a 1.71% rebound during one day of trading, the overall downward trend has provided buyers with significant leverage. This environment makes it harder for companies to maintain premium valuations during a debut.

When the primary stocks associated with the AI trade fall, it creates a ripple effect across the entire sector. Investors who were previously eager to buy into high-growth AI companies are now demanding lower entry prices. This dynamic is forcing companies like Anthropic to reconsider their launch strategies to ensure they can still attract sufficient capital.

The role of NVIDIA

NVIDIA serves as a critical compute partner for Anthropic, making its stock performance a major indicator for the AI industry. Under their current deal, Anthropic is set to adopt 1 gigawatt of Grace Blackwell and Vera Rubin systems. These systems provide the massive computing power required to train and run large-scale AI models.

NVIDIA's stock has experienced a notable decline, dropping 21.4% over the past month. Even with a small 2.78% rebound on a recent Friday, the downward trend remains a significant concern for the ecosystem. Because NVIDIA is the anchor stock for the AI trade, its price movements heavily influence the perceived value of its partners.

The decline in NVIDIA's price gives institutional investors more room to negotiate for lower prices on new offerings. If the hardware powering the AI revolution is seeing a valuation correction, the software companies built on top of that hardware face similar scrutiny. This interconnectedness means Anthropic's IPO is tied directly to the health of the semiconductor market.

Record-breaking goals

Anthropic was originally expected to raise up to $100 billion during its public debut. If successful, this would make it the largest IPO on record, surpassing the $86 billion that SpaceX raised in June. The scale of this offering has made it one of the most watched financial events in recent history.

Earlier this year, some investors were even discussing a potential $2 trillion debut for the company. However, that talk has cooled significantly as the market has soured on the AI trade. The move from a $2 trillion discussion to a potential $1 trillion valuation shows how quickly the financial landscape can shift in a matter of months.

The company is currently working with a group of 22 underwriting banks, led by Goldman Sachs and Morgan Stanley. Retail investors will also receive a portion of the offering through six different brokers, including Fidelity. Because of the massive scale, any adjustment to the price or timing will have significant implications for both institutional and individual investors.

What comes next

The next few weeks will be critical as Anthropic decides whether to proceed with its planned November roadshow. The company must balance the desire for a high valuation with the reality of a cooling market. If they choose to lower the valuation, it may be seen as a pragmatic move to ensure a successful listing in a difficult environment.

Alternatively, a postponement could allow the company to wait for a period of market stabilization. Delaying the IPO would give Anthropic more time to refine its financials and wait for the volatility in the NASDAQ to subside. Both options carry risks, as a delay could also lead to a loss of momentum or a change in the competitive landscape.

Investors will be watching closely for any official announcements regarding the price range or share count. Until Anthropic provides these details, the company remains in a state of flux. The outcome of this IPO will likely serve as a bellwether for the future of large-scale AI company listings and the broader viability of the AI trade.