The Anthropic Prospectus Arrives: My (But Not the) IPO Valuation

As you start listing out the risks that you will be exposed to as an Anthropic investor, you may be overwhelmed both by the number of risks as well as their diversity. To gain some control in this process, I will divide the risks into three groups:

a. Operating risk: The AI business is still evolving, and while Anthropic's growth and customer stickiness so far are noteworthy, the business will face challenges as it grows, and lives through market and economic turmoil. Thus, for Anthropic's customers spending on AI as a productivity tool, we do not know whether they will cut back their spending, and if so how much, in bad times, and for those who plan to replace employees with AI agents, whether the pace and extent of usage will change with the economy. The number that is designed to convey this risk into the valuation is the cost of capital, and for Anthropic, assuming that it carries the risk of large technology companies with an added burden of the compute commitments, I will estimate a cost of capital of 9.74%. Again, for perspective, note that the median cost of capital for US firms in September 2026 was 9.16% and that the third quartile for US firms is 9.88%. If you disagree, here are your choices:

b. Financing risk: The main talking point for many Anthropic bears is the compute commitment that runs into hundreds of billions, creating fixed costs that will be a drag on profitability, especially if revenue growth falls short of expectations, as well as the risk of distress. While bondholders are right to be trepidatious and will point to the current bond rating of BB+ for the company as backing for their concerns, there are two reasons why failure risk will be suppressed. The first is that the company has the cash balance to sustain itself through the near terms and meet its contractual obligations. The second is that, as a high-profile trillion-dollar plus publicly traded company, it will have access to capital. I do believe, though, that if revenues grow at anemic rates, both these benefits will dissipate, as cash gets burned through and the market cap collapses, and I will estimate a probability of failure of 10% for the company, with a loss of half its value if that happen. If you want to disagree, go into the input sheet worksheet of the spreadsheet, and if you scroll down to cells B52 and B53, you can put in your own views: