What happened
Anthropic's IPO prospectus was released, but its path to the Nasdaq has become bumpier due to the quarterly results of its hyperscaler partners, Microsoft, Google, and Amazon. These results added to market jitters around the AI buildout. The companies have been on a spending blitz in recent years to meet the surge in demand for AI infrastructure, but all three issued capex figures or forecasts that came in below analysts' estimates.
Anthropic's hyperscaler partners, Microsoft, Google, and Amazon, reported quarterly results that added to market jitters around the AI buildout.
The companies have been on a spending blitz in recent years to meet the surge in demand for AI infrastructure, but all three issued capex figures or forecasts that came in below analysts' estimates.
Microsoft lowered its capex forecast for the year to $170 billion from $175 billion, while Alphabet maintained its guidance for up to $205 billion and Amazon reiterated its roughly $220 billion forecast.
Amazon reported negative free cash flow for the second consecutive quarter, recording an outflow of $42.4 billion for the trailing 12-month period.
Google reported negative free cash flow of $9.1 billion, one reason the stock tanked almost 13% on Thursday, its worst day ever.
Why it matters
The market jitters around the AI buildout are a concern for Anthropic's IPO, as investors are still waiting to see Anthropic's third-quarter financials. The financial health of neoclouds like CoreWeave and Nebius is also a concern, as they are facing rising borrowing costs and a dearth of lenders. The worry is that basically now there's no company that's able to do this using their own business capabilities to create cash flow. It's becoming increasingly alarming.
The market jitters around the AI buildout are a concern for Anthropic's IPO, as investors are still waiting to see Anthropic's third-quarter financials.
The financial health of neoclouds like CoreWeave and Nebius is also a concern, as they are facing rising borrowing costs and a dearth of lenders.
The worry is that basically now there's no company that's able to do this using their own business capabilities to create cash flow. It's becoming increasingly alarming.
Anthropic's hyperscaler partners are also among its biggest investors, and the companies all need each other to keep the flywheel turning.
A big tail wind for Anthropic remains AI demand, as Microsoft, Google, and Amazon all reported cloud growth that topped analysts' estimates.
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What to watch next
The IPO market has largely been frozen since SpaceX's record offering in June. Biometric ring maker Oura, Australian AI data center operator Firmus, and SK Hynix's U.S.-based Solidigm subsidiary have all recently postponed or abandoned plans to IPO. Attention will now turn back from hyperscaler earnings to Anthropic, as investors assess how much risk they're willing to assume and at what price.
The IPO market has largely been frozen since SpaceX's record offering in June.
Biometric ring maker Oura, Australian AI data center operator Firmus, and SK Hynix's U.S.-based Solidigm subsidiary have all recently postponed or abandoned plans to IPO.
Attention will now turn back from hyperscaler earnings to Anthropic, as investors assess how much risk they're willing to assume and at what price.
Anthropic's FOMO — fear of missing out — on a potentially 'generational' company is real, and that the prospectus was 'very impressive,' showing 1,300% annual sales growth, 900% net revenue retention and an implied gross margin of 85%.
Companies would have to be extremely cautious, if not just foolish, to actually want to come out in this period.