1 Big Winner and 1 Loser From the Upcoming Anthropic IPO

The Anthropic IPO is almost upon us, and according to some reports, it could beat the four-month-old record for the largest IPO in history. This event will have important repercussions throughout much of the artificial intelligence (AI) industry and beyond. Some corporations will likely benefit from the increased capital Anthropic will have at its disposal, while others won't be so lucky.

Let's consider one company in each category. The one that could benefit from Anthropic's IPO is Broadcom (NASDAQ:AVGO), and the one that won't is Recursion Pharmaceuticals (NASDAQ:RXRX).

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1. Broadcom

Anthropic is reportedly planning one of the largest AI build-outs ever to tap into a massive opportunity to improve the productivity of who it calls "knowledge workers," who contribute more than $40 trillion in economic value globally.

The company will have to spend billions on AI infrastructure, and one corporation that will likely benefit from this is Broadcom, a semiconductor specialist. Broadcom designs custom AI chips and has partnered with corporations such as Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META). Broadcom also has an agreement in place to provide Tensor Processing Unit (TPU)-based compute capacity to Anthropic.

TPUs are custom AI chips co-designed by Broadcom and Alphabet. Note that the agreement between Anthropic and Broadcom is a long-term one -- it should last five years -- and it is worth $161.2 billion.

Further, the agreement is non-cancellable (except in the case of a default). Broadcom's relationship with Anthropic could eventually lead to additional agreements between the two companies, especially if Anthropic’s revenue continues to grow rapidly after it goes public.

This is just one of the many reasons Broadcom's medium-term prospects look attractive. Note that the company expects $115 billion in AI revenue for fiscal year 2027 -- that's more than its entire trailing 12-month (TTM) revenue. For its fiscal year 2028, Broadcom projects $230 billion in AI revenue.

There are some risks. For instance, Broadcom's AI chips account for an increasingly large share of total revenue, which could lead to lower gross margins over the medium term, since its infrastructure software segment carries higher margins. But even with that caveat, Broadcom's shares look attractive.

2. Recursion Pharmaceuticals

Recursion Pharmaceuticals is a clinical-stage biotech seeking to revolutionize drug discovery through an AI-powered operating system (OS) that screens drug candidates and advances the most promising candidates to clinical trials.

Recursion Pharmaceuticals' AI-based approach to drug discovery could decrease the significant time and costs associated with drug discovery and development. Beyond screening drug candidates, it could help streamline the process in other ways, including by automating some of the clinical trial design process. However, there are several problems with Recursion Pharmaceuticals.

The first is that, despite the company's claims that its approach could be superior, it still doesn't have a single drug on the market. True, it's often challenging for clinical-stage drugmakers to meet the stringent regulatory demands required to earn approval for brand-new medicines, but Recursion Pharmaceuticals was founded in 2013. If its AI-based approach were truly superior, we'd expect the biotech to have at least one program approved or in Phase 3 studies right now. But it doesn't.

Second, Recursion's AI-powered approach won't be much of an advantage anymore. That brings us to Anthropic, which offers drugmakers access to Claude, its large language model, to aid with drug discovery.

According to Anthropic, its list of clients that contributed $100,000 or more in TTM revenue includes nine of the 10 largest pharmaceutical companies. Recursion's AI OS may be better than Claude, but as already discussed, the company has so far failed to prove its OS's value.

As AI becomes standard in drug discovery among drugmakers big and small, Recursion Pharmaceuticals' advantage will disappear, and we'll need to value the company like we value any other clinical-stage biotech.

Once we do that, Recursion looks like a highly risky bet. Despite some promising candidates, it is still a couple of years away (at best) from having a single product on the market, and there is significant clinical and regulatory uncertainty to consider. So, the stock doesn't look attractive.

Prosper Junior Bakiny has positions in Alphabet, Meta Platforms, and Recursion Pharmaceuticals. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Meta Platforms. The Motley Fool has a disclosure policy.