Aswath Damodaran Values Anthropic At Under $1.5 Trillion, Slams Share Structure That Would ‘Put Kim Jong Un To Shame’

• Damodaran put the best-case 2036 revenue at $1.5 trillion and worst-case at $200 billion. 
• Anthropic made its S-1 filing public on Monday.
• Anthropic clocked around $16.3 billion in revenue in the six months ended June, up from $1.2 billion in the year-earlier period.

Anthropic could reach $1 trillion in annual revenue by 2036, valuation expert and New York University professor Aswath Damodaran said on Wednesday, ascribing the AI startup a fair valuation of $1.48 trillion ahead of its initial public offering.

Anthropic’s IPO, expected to open next month, could be a landmark moment for the AI industry and a test of whether the sector’s massive investments can translate into sustainable growth and profits.

Read Next

GOOGL Tumbles Over 10% Premarket: Analyst Says Investors Underappreciate Alphabet’s AI Strength

Yuvraj Malik

"The value of Anthropic, and any of the other AI product and service companies that will come later, ultimately rests on how big you believe the AI products and services market will become, and what portion of that market you company will inhabit," Damodaran wrote in a blog post on Wednesday.

"With that story in place, I believe that it is plausible that Anthropic's revenues could approach a trillion dollars in a decade."

Damodaran put the best-case 2036 revenue at $1.5 trillion and worst-case at $200 billion. The $1.48-trillion valuation assumes a 27.5% operating margin, a 3:1 sales-to-capital ratio, and a 9.74% cost of capital. 

The expenses for Anthropic are growing slower than revenues and that is helping reduce operating losses and putting the company on a glide path to not just profitability, but significant profitability, he wrote.

Anthropic IPO Risks

He said risks include potential cyclicality in enterprise AI spending, contractual compute commitments, credit rating and regulatory changes.

Damodaran said Anthropic IPO prospectus was “long and filled with distractions” but “is  analogous to reviewing a report card for a kindergartner (a precocious and talented one perhaps, but still a kindergartner) and trying to determine how much, if any, to set into that child's college fund."

He criticized Anthropic’s 5-class share structure with founders controlling 50.1% of the voting power, which he said completely neutralizes public shareholders’ influence. 

"I think Anthropic has managed to put those companies to shame with its combination of a benefit corporation structure (which gives the company the legal license to do pretty much whatever it wants with your money) and a voting share design that is so deviously self-serving that it would put Kim Jong Un to shame," Damodaran wrote.

Anthropic’s IPO Financials

The S-1 published on Monday showed that Anthropic clocked around $16.3 billion in revenue in the six months ended June 30, up from $1.2 billion in the year-earlier period. More than 1,900 customers paid the Claude AI maker at least $1 million over the past year.

The company booked a net loss of $80.7 billion in the first half of the year. After adjusting for a $72 billion non-cash expensing charge on convertible bonds, Anthropic's operating loss for the first six months was over $8 billion, according to Damodran. 

The company had $112.4 billion in cash and cash equivalents and over $600 billion in future compute power contractual commitments.

Anthropic's latest private market valuation was $1.4 trillion, according to Nasdaq Private Market. On Stocktwits, retail sentiment for the ticker was ‘extremely bullish.’

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read Next: INTC, AMD, AVGO, MU Decline On Samsung’s Profit Miss, Lighter Capex From Microsoft, Alphabet