The SEC Should Block Anthropic's IPO to Protect the Public

If Anthropic goes public, ordinary investors could bear the brunt of financial instability in the AI sector.

Anthropic has filed for an Initial Public Offering (IPO) with a planned stock market debut in November. While the company's publicly presented financial figures appear strong, a deeper look reveals nearly $900 billion in spending commitments, largely for computational power, extending into the 2030s. These commitments are effectively debts, despite not appearing on the balance sheet. The company's third-quarter revenue growth slowed, raising concerns about its ability to meet these obligations. Factors like uncertain demand for generative AI, intense market competition leading to price wars, high operational costs for data centers and chips, and external constraints like supply chain issues and community opposition are squeezing AI industry margins. This scenario poses significant financial risks if Anthropic goes public, potentially exposing retail investors and retirees to substantial losses.

The AI industry's opaque financial dealings, including extensive use of financial engineering and circular business practices, make it difficult for investors and regulators to assess true company health. Anthropic's substantial off-balance-sheet commitments, totaling hundreds of billions, highlight a strategy of securing future compute power at potentially unsustainable costs, a risky approach for a public offering. This move risks further concentrating market risk in already overvalued tech giants.

The combination of slowing revenue growth, massive fixed costs, and a highly competitive market with commoditized products puts immense pressure on AI companies like Anthropic. The analysis suggests that even if demand increases, intense competition will likely prevent price hikes, while costs remain high. This precarious financial position, coupled with potential delays in data center construction and supply chain issues, creates a volatile environment for public investors.