AI powerhouse Anthropic is planning to go public with a valuation that could reportedly be as high as $2 trillion. The creator of the Claude chatbot and suite of coding tools filed paperwork for a planned initial public offering, or IPO, with the Securities and Exchange Commission (SEC) in June.
Some insiders believe the company could go public as early as October, according to the Financial Times. The newspaper, which also was the first to report the $2 trillion figure, cited several backers of the five-year-old AI lab.
These investors argued that expected annualized revenue of up to $120 billion would justify this record-breaking valuation. That’s a little less than double the $65 billion annualized revenue the company reported as of the end of July, according to Bloomberg. (CNBC, however, reported that Anthropic’s executives didn’t discuss a specific valuation in recent discussions with investors.)
A $2 trillion valuation would soar past SpaceX’s blockbuster $1.77 trillion IPO in June. Elon Musk’s rocket company briefly hit a $2 trillion valuation on its first trading day before falling.
While excitement around Anthropic’s public stock debut is running high, the options for ordinary investors who want to gain exposure to the company ahead of its IPO are limited.
Earlier this year, Anthropic announced that it was curtailing sales of pre-IPO shares through special-purpose vehicles (SPVs). These legal entities pool investors’ money for a specific purpose — in this case, holding private shares of a not-yet-public company. Anthropic warned that scammers could try to mislead investors. “If someone offers you a way to participate, even on an indirect basis, in an investment in Anthropic, assume that it is invalid,” the company warned on its website.
You can get exposure, but ‘you have to be really picky’
The buzz and the huge dollar amounts being projected around Anthropic’s IPO have raised the demand — and the stakes for investors with FOMO.
“I do think there’s so much media attention around this that people are going to be excited about the debut,” says Brian Mulberry, chief market strategist at Zacks Investment Management.
This isn’t to say investors should avoid investments that offer early exposure to hot pre-IPO AI companies, Mulberry says. But you’ll want to look under the hood and make sure you understand exactly what you’re paying for — and how much you’ll be paying to do so.
“There are some decent offerings out there, but you have to be really picky,” he cautions.
Investors have their pick of a handful of exchange-traded funds, or ETFs, that hold Anthropic. The iShares AI Innovation & Tech Active ETF (BAI), the T. Rowe Price Technology ETF (TTEQ) and the KraneShares Public-Private AI & Technology ETF (AGIX) each hold shares of Anthropic (the first two also have pre-IPO stakes in Anthropic rival OpenAI). Investment firm Fred Alger Management holds pre-IPO shares of Anthropic in three ETFs: the Alger 35 ETF (ATFV), Alger AI Enablers & Adopters ETF (ALAI) and Alger Concentrated Equity ETF (CNEQ).
Investor caveats abound
For most of these funds, though, Anthropic represents only a tiny fraction of its overall holdings. (As a percentage, the ETF above with the greatest share of Anthropic is CENQ; a little less than 4% of its value is the Claude parent.) Another drawback all have in common: higher-than-average expense ratios. “Pay attention to what kind of a drag that’s going to have on your return,” Mulberry advises.
High-profile tech investor Cathie Wood’s firm, Ark Invest, also has a fund that holds Anthropic, the ARK Venture Fund (ARKVX). This isn’t a run-of-the-mill ETF, though; it is a closed-end fund, or CEF, which means investors should exercise extra vigilance before buying in.
Along with a minimum buy-in of $500 and a net expense ratio of 2.9%, the fund’s semi-liquid structure means you can’t just cash out and sell your entire holding if you change your mind.
Financial technology company Fundrise promises exposure to Anthropic and other hot pre-IPO startups via its Fundrise Innovation Fund (VCX), with the added appeal of a low $10 minimum buy-in. It’s worth noting, though, that this fund is also a CEF, which introduces some caveats that might give investors pause, according to financial research and ratings provider Morningstar.
“This CEF is trading at a massive premium,” Jack Shannon, an equity strategies principal at Morningstar, noted in a March blog post. Shannon also pointed out that a significant portion of the securities in the fund are held via third-party financial instruments rather than outright owned.
While not inherently bad, more complexity can mean lower transparency and higher costs, according to Shannon, who notes that these expenses “can eat meaningfully into returns.”
Some detractors are more blunt. In a recent blog post, Case Western Reserve Law School professor and visiting scholar at Harvard Law School Anat Alon-Beck criticized what she referred to as “shadow-equity structures… designed to mimic ownership of stock without necessarily delivering shareholder rights.”
Take the low-cost shortcut
If you want exposure to Anthropic without having to become a financial pro, though, Mulberry has good news. “There’s a much safer way to go about this,” he says.
Investors can get indirect exposure via other tech titans that have invested in Anthropic, such as Amazon, Google parent Alphabet, chipmaker Nvidia and Microsoft. “There’s a sideways or pass-through exposure by owning Google or Nvidia,” Mulberry says. Even holding passively managed, low-cost index funds gives you exposure to these companies.
Mulberry says it’s not surprising that interest in Anthropic is so high, but investors can’t let themselves get carried away. “The metrics and monetization Anthropic has been able to demonstrate are really strong,” he says.
In the high-stakes, high-cost arms race for AI dominance, “this one could be the unicorn,” although he adds, “It’s always a wild card.”
