What Anthropic’s IPO could mean for Amazon and Google

Anthropic (ANTH.PVT) is preparing for what could be a historic initial public offering (IPO) later this month, with Wall Street expecting the company to launch with a valuation of between $1.5 trillion and $2 trillion.

A public debut at the top end would put Anthropic ahead of SpaceX (SPCX) for the most valuable stock market IPO in history.

That would make plenty of people a whole lot richer on paper virtually overnight, including big-name investors like Amazon (AMZN) and Google (GOOG, GOOGL), two of the company’s largest backers.

The tech giants have invested billions of dollars in Anthropic, and, according to the AI lab’s amended S-1 investor prospectus, the pair will hold more than 5% of Anthropic’s outstanding stock when it goes public.

But those hefty investments also carry substantial risks if the company falls short of Wall Street’s enormous expectations.

“There’s risk to their investment in that … who knows in five years whether Anthropic will be the most profitable company in the world — or worth nothing,” Dorothy Lund, co-director of Columbia Law School’s Ira M. Millstein Center for Global Markets and Corporate Ownership, told Yahoo Finance.

“There are a lot of questions.”

Investors, suppliers, competitors

According to Amazon’s latest quarterly filing, the company has invested $18 billion in Anthropic so far, and currently has a financing agreement with the startup worth up to an additional $15 billion.

As of Sept. 30, those investments were worth $92.5 billion in Anthropic nonvoting preferred stock. Amazon also said it holds $146.2 billion in notes, which would convert to stock when Anthropic goes public.

Google doesn’t break out the exact value of individual investments, but in April it revealed plans to invest upwards of $40 billion in the company if it meets certain performance obligations. That’s in addition to prior investments worth roughly $3 billion.

Anthropic and Google aren’t just investors in Anthropic; they are also major compute suppliers.

In May, The Information reported that Anthropic entered into a $200 billion agreement to use Google’s Tensor Processing Units (TPUs) over a five-year period. Anthropic has also agreed to spend more than $100 billion via Amazon’s AWS over the next 10 years.

That means in addition to investment gains, the cloud giants will also earn revenue on sales to Anthropic. Such deals have frequently raised concerns about circular investing, creating an unsustainable trend in the AI market.

It gets more interesting when you consider that Amazon and Google also compete with Anthropic. Google has its Google DeepMind frontier lab that develops its own AI models that go toe-to-toe with Anthropic’s, and, according to Business Insider, Amazon is refocusing its AI efforts to better compete in the frontier space.

It all creates a strange mix for the companies.

The biggest benefit for Amazon and Google, however, could be the ability to continue selling compute capacity to Anthropic over time.

“To the extent that Anthropic is successful and meets the obligations that it has committed to for compute, that would clearly be a positive for Amazon and Alphabet,” Rosenblatt Securities analyst Scott Devitt explained.

But the tie-up between the companies could also raise legal concerns in the future.

“Regulators who are looking at this space might be kind of worried about the interrelationships here, [and] might not love to see competitors owning big chunks of each other,” Lund said.

We’ll see how this all plays out in the coming weeks and months as Anthropic speeds toward its IPO.

Email Daniel Howley at [email protected]. Follow him on X at @DanielHowley or reach out on Signal or Telegram.

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