Mitrade Insights is dedicated to providing investors with rich, timely and most valuable financial information to help investors grasp the market situation and find timely trading opportunities.

2021

Best News & Analysis Provider

FxDailyInfo

2022

Best Forex Educational Resources Global

International Business Magazine

Insights

News

The Anthropic IPO: Why Investors Are Better Off Avoiding It

Source The Motley Fool

Key Points

Anthropic has achieved significant growth this year, but it's still incurring losses.
Significant competition in the space makes it highly probable that spending will remain high, and staying out of the red may not be easy.
A high valuation out of the gate could make the stock vulnerable to a steep decline.
Motley Fool Issues Rare "Total Conviction" Buy Alert ›

Anthropic has recently filed its IPO, and its stock could begin trading next month. It'll be the next big IPO after Elon Musk's Space Exploration Technologies Corp (NASDAQ:SPCX) went public back in June, at a whopping valuation of around $1.8 trillion. Anthropic could command an even higher valuation.

Quite simply, it's ludicrous that valuations are as high as they are for businesses with so much risk and such underwhelming financials. The SpaceX IPO started out hot and then quickly fizzled out. Anthropic's IPO may be an even greater disaster. Here's why I would steer clear of it.

Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Person using voice recognition on a smartphone with a microphone and sound wave graphic

Image source: Getty Images.

The business is unprofitable, spending will be high, and competition will be fierce

Anthropic is an artificial intelligence (AI) company, known for its popular Claude chatbot and related models. The business has been growing exceptionally fast because the AI tools it offers are valuable to customers, particularly in coding, where they can lead to significant improvements in efficiency.

But when looking under the hood, its financials aren't all that compelling. While Anthropic's top line has grown incredibly -- from $1.2 billion during the first six months of 2025 to $16.3 billion over the first two quarters of this year -- so too have its expenses. At just under $17 billion, its operating expenses are still more than its revenue.

Meanwhile, the company doesn't have a strong enough competitive advantage to fend off rivals and avoid competing aggressively on price. Increasingly, more companies are entering the space, and plenty of chatbots and AI tools are available. Anthropic will have to continue to spend heavily to stay ahead of the competition.

And at some point, businesses may accept cheaper AI tools that are simply good enough. Will customers always need the latest and greatest AI services? I'm doubtful of that.

Anthropic's stock looks set up for failure

The biggest problem is ultimately valuation. This is a business that I don't think is worth even $1 trillion, and its IPO may be around double that figure. SpaceX's struggles are a good reminder to investors of how hype and excitement alone may not be a recipe for success. While SpaceX surged out of the gate, it would fall drastically. The rocket company is down around 35% from its peak price of more than $225 that it reached in its early trading days.

Anthropic's stock could fare much worse. Not only might it begin trading at a higher valuation, but with a business model that's less diverse and less compelling a growth story than SpaceX, and without a CEO like Musk to captivate investors with its incredible opportunities, I just don't think the market will stay bullish for all that long.

Investors who take a chance on Anthropic's IPO should brace for the very real possibility of a sharp sell-off, as the stock looks full of risk.

Should you buy stock in Space Exploration Technologies right now?

Before you buy stock in Space Exploration Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Space Exploration Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $344,608!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,327,222!*

Now, it’s worth noting Stock Advisor’s total average return is 904% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of October 28, 2026.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

Recommended Articles

The Fed will sit still on October 28 — but 100 of 100 economists now expect a December hike A Reuters poll run October 16-20 found 94 of 100 economists expecting the Fed to hold at 3.75-4.00% on October 28 — and all 100 expecting a hike in December, against less than half a month earlier. The market is close to the same price, with CME FedWatch at roughly 17% for October and 82.8% for December. With the Fed in blackout since October 17, here are the five dates that decide the rest of the year, what each one is priced for, and the two directions each can take.

Author Irene Q.

Oct 22, Thu

A Reuters poll run October 16-20 found 94 of 100 economists expecting the Fed to hold at 3.75-4.00% on October 28 — and all 100 expecting a hike in December, against less than half a month earlier. The market is close to the same price, with CME FedWatch at roughly 17% for October and 82.8% for December. With the Fed in blackout since October 17, here are the five dates that decide the rest of the year, what each one is priced for, and the two directions each can take.

Big Tech's $800 billion AI bill faces its first real test — free cash flow is the judge Alphabet and Microsoft report after the close on October 28, Amazon on October 29, with hyperscaler AI capex running near $800 billion a year. Meta's negative free cash flow and 9.40% drop on October 22 was the warning; this week's prints decide whether cloud growth and backlog can pay for the buildout. Here are the consensus numbers, the free-cash-flow table and the two-sided test.

Author Irene Q.

Oct 26, Mon

Alphabet and Microsoft report after the close on October 28, Amazon on October 29, with hyperscaler AI capex running near $800 billion a year. Meta's negative free cash flow and 9.40% drop on October 22 was the warning; this week's prints decide whether cloud growth and backlog can pay for the buildout. Here are the consensus numbers, the free-cash-flow table and the two-sided test.

Tesla jumps 5% as Barclays puts a $450 target on the SpaceX merger — the chart was already pointing to 431 Tesla closed at $391.62 on October 26, up 5.21%, after Barclays upgraded the stock to Overweight and lifted its target to $450 from $370, citing a sharp inflection in Robotaxi miles and a potential SpaceX merger. The move also completed a double bottom at $345.88 and $349.33, with a neckline at $388.56 and a measured target of $431.24. Here is what the upgrade actually says, why the chart and the analyst now point the same way, and what would break the target.

Author Irene Q.

Yesterday 05: 30

Tesla closed at $391.62 on October 26, up 5.21%, after Barclays upgraded the stock to Overweight and lifted its target to $450 from $370, citing a sharp inflection in Robotaxi miles and a potential SpaceX merger. The move also completed a double bottom at $345.88 and $349.33, with a neckline at $388.56 and a measured target of $431.24. Here is what the upgrade actually says, why the chart and the analyst now point the same way, and what would break the target.

Anthropic files for a $2 trillion IPO — the $80.7 billion loss is the decoy, the $450 billion compute bill is the risk Anthropic publicly filed its S-1 on October 26, revealing $16.29 billion of first-half revenue (+1,304% year over year) and a $80.7 billion net loss — of which $72.4 billion is a non-cash convertible-note charge. The real number is the $450 billion of signed, mostly non-cancelable compute commitments. Here is what the filing says, why NVDA, ARM and MU are the tradeable read-through, and the conditions that decide whether the AI trade passes its first public valuation test.

Author Irene Q.

Yesterday 06: 02

Anthropic publicly filed its S-1 on October 26, revealing $16.29 billion of first-half revenue (+1,304% year over year) and a $80.7 billion net loss — of which $72.4 billion is a non-cash convertible-note charge. The real number is the $450 billion of signed, mostly non-cancelable compute commitments. Here is what the filing says, why NVDA, ARM and MU are the tradeable read-through, and the conditions that decide whether the AI trade passes its first public valuation test.

Fed October Rate Decision Preview: Rate Hike Pause Has Become Consensus, How Will US Stocks, Dollar, and Gold React?The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide

Author TradingKey

Yesterday 10: 21

The Federal Reserve will announce its October interest rate decision at 14:00 Eastern Time on October 28, and Fed Chair Warsh will hold a press conference at 14:30. Markets currently wide

Popular Symbols