Got $5,000?: 2 Magnificent AI Cloud Stocks to Buy Before the Anthropic IPO

Arguably more than any other artificial intelligence (AI) start-up, Anthropic has played a key role in advancing AI. The company's Claude family of large language models (LLMs) is among the most advanced and widely used. The release of the Claude Mythos Preview earlier this year broke new ground, as the model detected "thousands of high-severity vulnerabilities, including some in every major operating system and web browser." This sparked Project Glasswing, an industrywide coalition of chipmakers, cloud providers, and cybersecurity experts dedicated to securing "the world's most critical software."

After a confidential filing with the Securities and Exchange Commission (SEC) in June, Anthropic's initial public offering (IPO) is expected as early as October. The company is seeking to raise as much as $100 billion and fetch a $2 trillion valuation, according to numerous media reports. That would make it the biggest IPO in history.

Investors with $5,000 to spend who are looking to get in on the action -- while avoiding historical IPO volatility -- should consider these two AI cloud stocks, which stand to benefit from Anthropic's public debut.

Image source: The Motley Fool.

Amazon

As an early investor and big backer of Anthropic, Amazon (NASDAQ: AMZN) is poised to profit from Anthropic's IPO in several ways.

The most obvious is the growing return on the company's investment. Amazon has previously invested $18 billion in Anthropic and has the option to deploy an additional $15 billion if the company reaches certain milestones. As of July, the value of Amazon's position had swelled to $190.4 billion.

The collaboration between the two companies goes beyond the financial stake. Earlier this year, the pair announced a strategic partnership that gives Anthropic access to 5 gigawatts of current and future generations of Amazon's Trainium chips, which will be used to train and power the start-ups advanced AI models. Moreover, Amazon Web Services (AWS) customers have full access to Anthropic's Claude family of models via their AWS account.

In all, Anthropic has committed to spending more than $100 billion with AWS over the coming decade.

To recap, Amazon stands to benefit from an Anthropic IPO in several ways. First, the value of its early stage investments will be worth much more, particularly if the company can command a $2 trillion valuation. Trainium chips are firmly entrenched at Anthropic, which works directly with Amazon on improvements to its AI-centric tech. Finally, Amazon benefits by providing easy customer access to the Claude family of models.

In Q2, AWS revenue accelerated to 37% year over year to $42 billion, its highest rate of growth in 18 quarters, so the future looks bright for the cloud provider.

You have to spend money to make money, and Amazon's forecast of $220 billion in capex spending -- which is mostly AI-related -- spooked investors, and the stock is down 10% from its peak. On the bright side, investors can buy Amazon shares at just 20 times earnings, near an all-time low. That also gets them excellent exposure to Anthropic ahead of its high-profile IPO.

Alphabet

Amazon isn't the only company with a sizable stake in Anthropic and multiple ways to win.

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has previously invested $13 billion in the AI specialist and has the option to deploy an additional $30 billion if Anthropic meets certain milestones. As of July, the search giant's stake had risen to $124 billion. That gives Google a roughly 15% stake in the AI start-up. A recent regulatory filing suggests that the Google parent may have already invested another $10 billion in the start-up since then.

Earlier this year, the pair announced an expansion of their existing partnership, with Anthropic gaining access to 3.5 gigawatts of compute capacity generated by Google's Tensor Processing Units (TPUs) via Broadcom beginning in 2027, beyond the existing 1-gigawatt agreement. Similar to its agreement with Amazon, Alphabet customers can access Anthropic's Claude family of models through their Google Cloud account.

In all, the AI start-up has committed to $200 billion in cloud and semiconductor spending with Alphabet over the coming five years.

Its relationship with Anthropic benefits Google in multiple ways. The value of its early stage and recent stakes will be much higher ahead of Anthropic's high-profile IPO. TPUs are also deeply embedded in Anthropic's process, which consults directly with Broadcom (which designs Google's TPUs) on improvements. Finally, Google Cloud customers gain access to Anthropic's family of Claude models.

In Q2, Google Cloud revenue of $25 billion accelerated to 82% year over year, the fastest rate of growth among the major cloud providers.

Alphabet also boosted its capex spending forecast to $200 billion at the midpoint of its guidance. While the magnitude of the number worried fair-weather investors, Google Cloud CEO Thomas Kurian revealed that the payback period for these AI servers was less than two years -- and less than a year for those using Google's TPUs.

Alphabet has shed 13% of its value since earlier this year, but at 17 times earnings, the valuation sits near an all-time low.

Danny Vena, CPA has positions in Alphabet, Amazon, and Broadcom. The Motley Fool has positions in and recommends Alphabet, Amazon, and Broadcom. The Motley Fool has a disclosure policy.