AI valuation divergence intensifies! Anthropic IPO: Enthusiastic Silicon Valley bids $2 trillion, while a cautious Wall Street only recognizes $1.5 trillion

Valuation differences for AI company IPOs are widening.

According to a report by tech media outlet The Information on September 30, some investment banks in early discussions on the venture capital and private equity market side are considering giving Anthropic an approximate $2 trillion valuation. However, in the public market, two large investment institutions believe a more appropriate valuation should be closer to $1.5 trillion. Silicon Valley venture capital circles are still chasing the upside of AI assets, while Wall Street's public market is more focused on cash flow, financing costs, and downside scenarios.

Anthropic is expected to take several weeks before officially starting its IPO roadshow. The report notes that this AI company was originally considered one of the most closely watched IPOs this year, but stock market volatility has begun to affect investor attitudes toward pricing large tech IPOs.

Between $2 trillion and $1.5 trillion lie two different pricing logics

Evan Skorpen, public market portfolio manager at Lead Edge Capital, told The Information, venture capital institutions often wonder: "What could this company be worth in the most optimistic scenario?"

He said that with this mindset, "there are a lot of exciting data points in the market."

But public market investors' considerations are different. Skorpen said, "Public market investors can't simply think about what might go right, because we have to own the stock every day. Public market investors think more about what could go wrong."

He summarizes this difference as: Silicon Valley investors sit on Sand Hill Road betting on the future, while Wall Street investors watch daily stock prices and consider risks.

Reportedly, Anthropic has already committed to procure at least 14.8 gigawatts of computing power. The cost of these agreements could exceed $500 billion over the next decade. Data from Anthropic's draft IPO prospectus, disclosed by Reuters this week, has reignited concerns among investors about its financial commitments and risk exposure.

Samantha Lau, Chief Investment Officer for Small and Mid-Cap Growth Equities at AllianceBernstein, said, "Any company planning to go public now must price reasonably, but I haven't seen that yet."

She said, "The only way to open the market is to be a bit conservative."

AI’s return on investment becomes a core issue for public markets

Anthropic and other leading AI companies like OpenAI are expected to still need continuous fundraising even after completing their IPOs, to cover expenditures on data centers, chips, and computing resources.

Lau commented that she is optimistic about the software capabilities demonstrated by tech companies in AI agents, and acknowledges that these capabilities may bring returns on data center and chip investments. However, she also pointed out that rising interest rates increase corporate borrowing costs, and investment institutions need to see tangible returns.

"The question is, before reaching the ultimate ideal state, who is going to pay for this?" she said.

Anthropic also faces the variable of intensifying competition.

The report stated that OpenAI’s latest model has made progress among enterprise clients and is currently in early talks for a pre-IPO fundraising round of about $30 billion. If the deal proceeds, OpenAI and Anthropic may end up competing for some of the same sources of funding.

Small and mid-sized AI and data center IPOs feel pressure first

The cautious attitude toward valuations and fundraising has already affected a batch of companies that originally planned to go public in the near future.

Smart ring company Oura abruptly postponed its IPO on Tuesday, which was scheduled to finalize the offering price the next day. Sources said investors considered the company’s valuation expectations too high.

SB Energy, under SoftBank, has also not yet started IPO marketing. The company is building major facilities for OpenAI in Ohio. Sources said investment banks discussed a valuation of about $60 billion, but some IPO investors currently find this price difficult to accept, with some also concerned about its revenue dependence on OpenAI.

Scrutiny of data center companies in the market is also heating up.

Reportedly, London-based “New Cloud” company Nscale, which plans to go public, as well as private equity-owned data center developer Switch, are both facing investor concerns over high leverage and ongoing financing needs. Companies such as Vantage Data Center, held by CyrusOne and Silver Lake, are also expected to seek IPO financing in early next year.

A senior IPO investor commented, “We need situations like this to remind investment banks and private equity sponsors: we are not price takers.”

Private markets are still trading at high prices

Contrasting the caution in public markets, venture capital markets show no clear cooling off in enthusiasm for investing in AI companies.

The developer behind AI consumer assistant Instinct announced this week that after just one year in business, it had raised $1 billion at a $10 billion valuation. Investors include Sequoia Capital, Benchmark, and Coatue.

But signs of caution about overheating valuations are also emerging within private markets.

Pat Grady, a partner at Sequoia Capital, said in public presentation materials to limited partners last week that most venture capitalists believe AI capabilities are developing quickly and have reached the controversial threshold of "artificial general intelligence".

However, he also noted, “Valuations are completely crazy.”

Grady commented that some startups, after completing one round of funding, soon undergo the next round at a much higher valuation—"a typical sign of a bubble".

SpaceX's rise may still support large IPOs

Large IPOs are not without their support factors.

SpaceX raised nearly $86 billion in the largest IPO in history in June this year. Since then, its share price has risen about 10%, corresponding to a valuation of approximately $2 trillion, outperforming the broader market.

This return has benefited participating investors and provided early investors like Founders Fund, Valor Equity Partners, and Sequoia Capital with funds to continue investing in the AI field.

For Anthropic, some large mutual funds had already acquired shares at lower prices during private rounds, which may make them more tolerant of IPO pricing. Tech companies and existing investors such as Nvidia, Alphabet, and Amazon may also continue to provide funding support.

Ashley MacNeill, Head of ECM Strategy at Vista Equity Partners, said that the high valuations in private markets "do not appear to have fully translated to the public markets."

She said: "Historically we’ve had times like this, and we’ll see them again. It’s just especially obvious now because of these ultra-large IPOs in the market."