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View from the Valley: Has Anthropic killed the AI golden goose with its IPO? Many here are worried
Silicon Valley shivers with anticipation, and not a little fear, our man in San Francisco reports
The topic everyone was talking about this month was Anthropic’s IPO, which formally filed papers for going public.
As we revealed in June, Anthropic is going to be the first of the two 800lb gorillas in the field to go public, since OpenAI has decided to delay its offering. The float is expected on November 16 and will value the company at between $1.5 trillion and $2 trillion. But many here are saying those numbers just don’t add up.
Anthropic reported revenues of $16.29 billion in the first half of this year, albeit with accounting that has caveats and is based on a small number of customers. But the S1 filing revealed that Anthropic is sitting on $450-$700 billion of noncancelable contracts to build out its own data centres and buy computing power from others.
There are also serious fears that Anthropic’s revenue growth is slowing. The filing did not include third quarter results, nor did it make any serious predictions as to what that will be. All of this comes against a background of increasing competition from massively cheaper Chinese AI models that are following Microsoft’s business model – make it good enough and a lot cheaper.
Those fears weren’t helped by a report from Torsten Slok, Chief Economist at Apollo Global Management, that said that the vast majority of S&P companies are seeing no real productivity gains from using the expensive AI models offered by Anthropic and OpenAI.
“There are still no signs of AI boosting productivity growth,” he said bluntly. “Mainstream corporate America does not need the latest model and is unwilling to pay for it. As long as agentic AI and token spending are confined to a small part of the economy, the macroeconomic effects of AI will be very limited.”
More than a feeling
How folks in the Valley feel about this depends very much on who you talk to. Any employee of an AI company, or a related business, is understandably optimistic. That’s causing some problems, however. Rents and house prices in San Francisco have soared, and among the local populace there’s a considerable amount of dislike of these well-heeled interlopers.
Among those tech staff outside the bubble, doomsayers abound. The layoffs are continuing and AI is widely blamed for this. While not explicitly mentioning AI, Microsoft announced plans this month to “offer” 27% of its workforce voluntary redundancy, and other companies are also shedding staff.
Google staffers are particularly nervous. This month’s quarterly results tanked the stock by over 10% – wiping out $500 billion in market capitalisation despite overall revenues rising 25% in the quarter and Cloud services reporting over 100% growth.
But, crucially, Google reported negative cash flow of $9.1 billion, compared to estimates of $3.5 billion from Wall Street.
The big fear is that if AI is cannibalising search revenue, which is Google’s main money spinner, then the company will face tougher times ahead. That’s particularly felt by Google’s own staff, who typically have lower wages than many in Valley big tech firms because they get paid in stock options.
Plus there’s the lingering fear among everyone that if Anthropic’s IPO fails, people’s retirement accounts and investments are going to crash if the AI bubble bursts and it brings down the whole stock market with it. Anthropic’s founders won’t care, they’ll have banked billions, but the rest of us are less sanguine.
There’s a storm coming in
And finally, it wouldn’t be a report from a British person unless there wasn’t mention of the weather.
If you’re coming to the Valley this winter, try and avoid visiting during the last week of the month, when king tides kick in. King tides are exceptionally high tides caused by an alignment of the Sun, Moon and Earth, and usually they’re not a big problem.
But we’re facing the largest El Niño yet recorded, causing up to 30cm increases in ocean levels in the Pacific. The increased temperatures also create a Kelvin wave, as warm water expands and floods west, raising sea levels by another 15cm. Add to that the effect of climate change, which has already caused increased flooding.
This week, parts of San Francisco’s Financial District were already getting flooded and it’s only going to get worse once the rainy season kicks in shortly. Plus if storm surges occur, which isn’t uncommon. The Valley itself is better protected, thanks to a range of hills to the West, but if Bay levels surge then Meta staff could find themselves wading to work.
More of Iain’s View from the Valley pieces
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Iain Thomson
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