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Prediction: This Is How Much a $5,000 Investment in Anthropic Will Be Worth in 1 Year
Key Points
Anthropic filed its IPO this week, and it could take place as early as next month.
Its IPO may value the company at $2 trillion -- potentially breaking the previous record set by SpaceX.
The company generated more than $16 billion in revenue through the first six months of the year, but remains unprofitable.
Anthropic recently filed its IPO, as its shares will soon be available for investors to buy. The artificial intelligence (AI) company could fetch up to a $2 trillion valuation, which would eclipse Space Exploration Technologies Corp (NASDAQ:SPCX) , which was valued at around $1.8 trillion when it went public back in June.
It's one of the hottest-anticipated IPOs of the year, sure to garner a lot of attention. Here's how much I think a $5,000 investment in the tech stock could be worth in a year.
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The business shouldn’t be worth more than SpaceX
When SpaceX went public in June, it was a hot buy right out of the gate, and at one point its market cap reached more than $2.6 trillion. It's declined significantly since then and is now around $2 trillion, with the stock trading back around $150, which is where it opened on its first day.
Anthropic's stock doesn't look worthy of a better performance or valuation. With loads of competition in AI and many other chatbots out there, it's even more difficult to justify paying a high valuation for the stock than SpaceX, which has some tremendous growth opportunities in not only AI but also space travel and the telecom industry via its Starlink business.
While Anthropic has been growing fast, with revenue totaling $16.3 billion through the first six months of the year (versus $1.2 billion a year ago), its operations remain unprofitable -- Anthropic's operating loss was $693 million during the first two quarters. And keeping up that rate of growth may prove to be challenging in a hotly contested AI market.
Anthropic will likely do far worse than SpaceX
If Anthropic does indeed get anywhere near a $2 trillion valuation, then I think it would make for a bad and risky stock to buy, and it'll likely perform far worse than SpaceX. In a year, I would expect a $5,000 investment to be worth $3,000 or less, representing a decline of at least 40%.
There's increasing hesitation in the markets when it comes to AI, and Anthropic's high valuation simply isn't warranted. It doesn't have the moat and competitive advantage necessary to justify such a premium, especially given its lack of profitability. It may be an exciting stock, but that doesn't often make for the best investment.
Even for investors who like Anthropic and who are bullish about its future, a good move may not be to rush to buy the IPO, as the stock will likely come down sharply in price.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.