Anthropic's S-1 landed on the good side of expectations, and we read the headline $80 billion net loss as mostly an accounting item rather than a cash problem. Of that $80 billion, roughly $72 billion is a non-cash accounting treatment, so the underlying loss for the first half of the year was about $8 billion. That loss is set against roughly $130 billion of cash and short-term investments on the balance sheet, which is why the market's reaction to cash burn has been measured. GAAP accounting is GAAP accounting, and we think the charge is easily explained to public investors. Revenue held up well, and the customer mix has improved materially: early on the business appeared heavily concentrated in one or two customers, and it now serves ballpark 10,000+ customers with $100,000+ in trailing 12 month revenue, which we view as a better and more diversified revenue base. Our net read on the filing is very positive. We believe Anthropic can also serve as a hedge for a pure-play software portfolio, since in our opinion the company is positioned to take a large share of the software and knowledge-work market, and we expect capital to keep rotating out of software and into hardware. The open question is whether Anthropic can grow revenue by something like 10x from here into 2027/8, and that is what the public market will test.
Anthropic is reportedly targeting a $2 trillion IPO, and while we think that level is achievable, our preference would be a price nearer $1.5 trillion to $1.6 trillion that leaves room for the stock to run. The secondary market is trading Anthropic at about $1.55 trillion today. Ahead of the SpaceX listing, some private holders sold at discounts to avoid the lockup while other buyers paid premiums to get in early, and we expect similar volatility here. Anthropic is using a staggered early-release lockup much like SpaceX's, with eight+ release cycles, and we expect inclusion in the major indices. SpaceX listed at $135, ran to about $220 a share for a day or two, and has since pulled back to around $150. If Anthropic prices at $1.5 trillion to $1.6 trillion, we would expect it to settle around $1.7 trillion after the initial post-IPO swings. We spoke with one investor who wants to buy now at a discount on the view that the stock goes north of $2 trillion, and to sell when the lockup ends, a trade that in our opinion has a lot of moving parts. We think OpenAI's reported $1.25 trillion target is the smarter approach, and we believe pricing Anthropic for investor returns rather than for the largest IPO in history could push the stock above $2 trillion on its own. There is also a case for a $2 trillion debut that still trades up in the first six months, given that public investors have never been able to buy a pure-play large language model company.
Public markets will want both the growth story and the revenue, and on the question of who finishes 2027 with more revenue, our view is SpaceX. SpaceX is adding data center revenue, and Elon Musk has talked about going from roughly $18 billion of revenue to as much as $500 billion next year. Musk has said he expects SpaceX to reach $100 billion of annualized revenue in December, and the company was profitable this past quarter. We believe SpaceX can secure the GPUs, appears to have a plan for power, and has shown it can stand up data centers quickly, and we expect strong demand for compute on the other side. On that math we see SpaceX as an AI data center business rather than a space company: if it does $100 billion a year in revenue and only a few billion comes from Starlink and launch, the data center business defines it, and data centers in Nashville, Tennessee have nothing to do with space. Anthropic, by contrast, needs to keep revenue growth going, and we are watching whether Claude Duet, the AI assistant it launched on October 21, takes off against heavy competition. We also question how its CEO's famously candid style will play on public company earnings calls. More broadly, we think the world is moving toward hardware, and Anthropic will likely need to become more of a compute company to deliver strong model results (...Anthropic will need to have their own data centers).
Fireworks AI is reportedly looking to raise at $30 billion to $40 billion, up from a $17.5 billion round in July, and in our opinion the AI inference category deserves a close look. Fireworks is an AI inference platform and had about $1 billion in annualized revenue at the time of the July round, which Gavin Baker backed. We expect the new round to land in the $35 billion to $40 billion range, roughly three months after the last one. Unlike Etched, which has moved from $12 billion to $21 billion and is now reportedly considering $41 billion with no revenue, Fireworks is showing the revenue behind its step-up. Databricks offers a reference point: it was at about $212 billion in the secondary market this past week, making it the third-largest pre-IPO stock in the world, after a round at $190 billion in August. Databricks runs a business similar to Fireworks AI and Baseten, so we ask whether Fireworks could become a $200 billion company within two years, which would be a 5x from $40 billion before dilution. We see the platforms that help businesses run and customize open-source models as an intriguing part of the AI market. Together AI trades at about a $10 billion secondary market valuation with more revenue than Fireworks, and our preference is to keep Fireworks AI, Baseten and Together AI on the watch list as a group.