Will Anthropic Soar After Its IPO? History and SpaceX Offer an Answer That’s Strikingly Clear.

Anthropic, the maker of popular AI tool Claude, has been stirring up excitement in the investment community in recent days. That's because the artificial intelligence (AI) lab may be heading toward an initial public offering in the near future. Anthropic hasn't set a date, but it released its prospectus this month, marking a key step toward a market debut.

This year has been an exciting one for IPOs, particularly due to the operation of Space Exploration Technologies. SpaceX in June launched the biggest IPO on record, bringing in $85 billion and starting its story as a public company with a valuation in the trillions of dollars. Now, investors are looking eagerly toward Anthropic for another similar story. Anthropic has been eyeing a valuation of $1.5 trillion to $2 trillion, according to press reports.

Will Anthropic soar after its IPO? History and SpaceX offer an answer that's strikingly clear.

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From OpenAI to Anthropic

Before we get to that, however, let's take a quick look at the Anthropic growth story. Dario Amodei founded the lab in 2021 with a group of fellow former OpenAI researchers. As mentioned, Anthropic is known for Claude products, and a peek at its prospectus shows explosive demand and growth. In a three-year period, Anthropic's revenue has climbed from next to nothing to well into the billions of dollars.

Revenue in the six months ended June 30 surged a mind-boggling 1,300% to more than $16 billion. The popularity of Claude has led to net revenue retention of 900% as of Sept. 30. And more than 50% of the Fortune 500 are spending $100,000 or more on Anthropic's services. Even better, Anthropic predicts that its momentum with these companies is in its early days, leaving room for tremendous growth down the road.

That said, it's important to keep in mind the risks involved in Anthropic's business. The company hasn't been shy about this, highlighting these in more than 90 pages of the prospectus. Risks include those that you might expect from a young company, such as a history of losses. But there are others, such as an AI model possibly presenting "catastrophic or existential risks to humanity" and the idea that insurance may not be enough to cover potential liabilities.

An investment in Anthropic clearly offers investors access to tremendous growth, but risk is high -- so while certain aggressive investors may rush to get in on the IPO or even buy the stock soon after its official debut, other investors might choose to sit firmly on the sidelines.

A look at history and SpaceX

Now, let's consider what history tells us about the early performance of IPO stocks. And we also have a fresh example, with the operation of SpaceX.

Looking back at ten of the biggest IPOs from 1999 through 2023, including Meta Platforms and Uber Technologies, eight out of 10 delivered declines in their first three months of trading. And five of these declines were in the double digits. This year, Space X, which launched in early June, followed the trend, dropping about 6% in its first three months on the market.

All of this tells us that a major IPO doesn't necessarily lead to immediate gains. History offers a strikingly clear answer: In most cases, IPO stocks fall in their first months of trading.

What does this mean for you ahead of the potential Anthropic IPO? Investing in a particular IPO stock depends on your investment strategy and appetite for risk. If you're a highly aggressive investor, you may have been waiting months for the Anthropic IPO to take shape and are comfortable with the level of risk in relation to possible rewards. In this case, you might be eager to get in on Anthropic as early as possible -- even if the stock follows the historic pattern of early declines.

But considering the risks Anthropic faces and the fact that IPO stocks generally offer plenty of opportunities to buy on the dip, most investors might be better off keeping Anthropic on their watch lists.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.