Alphabet Is Set to Become an Even Bigger Anthropic Shareholder After the IPO

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shareholders just got a line item worth a second read. I certainly needed a strong cup of coffee to get through this one.

On Nov. 10, Anthropic amended its S-1 filing in preparation of an initial public offering (IPO), and the new material is particularly interesting to Alphabet and its investors. The new document says Alphabet's Google division will invest another $10 billion in Anthropic as soon as it goes public, buying a bunch of nonvoting Class N shares at whatever the IPO price is.

The price range is $70.00 to $78.00, and Reuters says pricing comes next week. The IPO won't be far behind.

Image source: Getty Images.

How big does Google's stake get?

At the $74.00 pricing midpoint, Google would grab 135.1 million shares. That lifts its Class N holdings from roughly 1.65 billion shares to 1.79 billion, an increase of 8.2%. The holding would amount to about 13.7% of Anthropic's outstanding Class A and Class N shares after the offering, before counting odd ducks like options and restricted stock units. Amazon (NASDAQ: AMZN) still holds more Class N than Google, according to Anthropic's updated S-1, at about 1.92 billion shares.

A promise from March comes due

Before anyone jumps to conclusions, this isn't fresh money. The filing describes Google's upcoming purchase as funding a part of the financing it already promised in a March 2026 deal. There's another $10 billion left to fulfill of that two-year-old $20 billion pot. The same funding dollars are putting on a new costume. Potential debt notes are taking the form of stock shares instead.

Full economics, zero votes

Much like the classic Motley Fool Rule Breakers philosophy, Google is doubling down on its investment in Anthropic as the price keeps rising. The IPO midpoint is nearly triple the share price Google paid in March and 25% above its May investment.

Unlike Rule Breakers, however, Alphabet's equity buyers don't insist on voting rights. Anthropic's Class N shares come with full economic ownership but zero boardroom votes per stub. Anthropic will probably be stingy with printing more of the actual vote-bearing Class A shares (not to mention the special Class E and Class T papers). Google is buying a front-row seat to Anthropic's IPO, but has no control over the company's future direction.

Is this a big deal for Alphabet?

Sort of. At the $74 midpoint, Google's Class N stake would be worth about $132.4 billion, or roughly 3.8% of Alphabet's $3.52 trillion market cap as of Nov. 10. That's a huge number attached to a modest slice of the Google parent.

I wish Alphabet would say more. Its latest 10-Q lists $128.2 billion of private-company equity, "primarily" one company, and never says which. Anthropic came up twice on the Oct. 28 earnings call, both times about working together rather than the ownership stake. The more visible equity story is Alphabet's restricted stake in Space Exploration Technologies (NASDAQ: SPCX), another recent mega-IPO, which accounts for $75.2 billion of its $90.4 billion in marketable equity securities.

Anthropic is also a customer, with at least about $121.3 billion of Google Cloud hosting committed through July 2033. Google Cloud revenue just jumped 103% to $30.7 billion.

The catch: Anthropic booked $33.2 billion in revenue over nine months against $900.9 billion in computing commitments. If it keeps raising capital, Alphabet wins as both owner and supplier. If Anthropic's financing tightens, both of Alphabet's positions come under pressure at once.

Anders Bylund has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Space Exploration Technologies. The Motley Fool has a disclosure policy.