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The Anthropic IPO: Why Investors Are Better Off Avoiding It
Key Points
Anthropic has achieved significant growth this year, but it's still incurring losses.
Significant competition in the space makes it highly probable that spending will remain high, and staying out of the red may not be easy.
A high valuation out of the gate could make the stock vulnerable to a steep decline.
Anthropic has recently filed its IPO, and its stock could begin trading next month. It'll be the next big IPO after Elon Musk's Space Exploration Technologies Corp (NASDAQ:SPCX) went public back in June, at a whopping valuation of around $1.8 trillion. Anthropic could command an even higher valuation.
Quite simply, it's ludicrous that valuations are as high as they are for businesses with so much risk and such underwhelming financials. The SpaceX IPO started out hot and then quickly fizzled out. Anthropic's IPO may be an even greater disaster. Here's why I would steer clear of it.
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The business is unprofitable, spending will be high, and competition will be fierce
Anthropic is an artificial intelligence (AI) company, known for its popular Claude chatbot and related models. The business has been growing exceptionally fast because the AI tools it offers are valuable to customers, particularly in coding, where they can lead to significant improvements in efficiency.
But when looking under the hood, its financials aren't all that compelling. While Anthropic's top line has grown incredibly -- from $1.2 billion during the first six months of 2025 to $16.3 billion over the first two quarters of this year -- so too have its expenses. At just under $17 billion, its operating expenses are still more than its revenue.
Meanwhile, the company doesn't have a strong enough competitive advantage to fend off rivals and avoid competing aggressively on price. Increasingly, more companies are entering the space, and plenty of chatbots and AI tools are available. Anthropic will have to continue to spend heavily to stay ahead of the competition.
And at some point, businesses may accept cheaper AI tools that are simply good enough. Will customers always need the latest and greatest AI services? I'm doubtful of that.
Anthropic's stock looks set up for failure
The biggest problem is ultimately valuation. This is a business that I don't think is worth even $1 trillion, and its IPO may be around double that figure. SpaceX's struggles are a good reminder to investors of how hype and excitement alone may not be a recipe for success. While SpaceX surged out of the gate, it would fall drastically. The rocket company is down around 35% from its peak price of more than $225 that it reached in its early trading days.
Anthropic's stock could fare much worse. Not only might it begin trading at a higher valuation, but with a business model that's less diverse and less compelling a growth story than SpaceX, and without a CEO like Musk to captivate investors with its incredible opportunities, I just don't think the market will stay bullish for all that long.
Investors who take a chance on Anthropic's IPO should brace for the very real possibility of a sharp sell-off, as the stock looks full of risk.
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.