Key Points
-
The developer of the Claude large language model filed its public prospectus on Oct. 26, starting the clock on an expected pre-Thanksgiving IPO.
-
Since May 2012, history shows that tech-driven IPOs have often stumbled out of the starting gate.
-
Furthermore, Anthropic’s valuation is well above the historical line in the sand that denotes bubbles waiting to burst.
-
Less than five months ago, on June 12, Elon Musk’s Space Exploration Technologies (NASDAQ:SPCX), better known as SpaceX, rewrote Wall Street’s record books with its $1.77 trillion initial public offering (IPO). Within the next couple of weeks, the developer of the Claude large language model, Anthropic, may leapfrog SpaceX.
Anthropic’s newly filed public prospectus on Oct. 26 starts the clock on what should be a pre-Thanksgiving IPO worth up to $2 trillion. While retail investor hype for this debut should be thick enough to cut with a knife, history tells us that the Anthropic IPO will be an epic failure.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Hyped tech IPOs often stumble out of the starting gate
Although past events can’t guarantee what’s to come, history has a knack for foreshadowing the future on Wall Street. For the Anthropic IPO, history cautions that hyped tech-driven IPOs commonly stumble out of the starting gate.
Before SpaceX debuted, the analysts at Truist Financial (NYSE:TFC) published a data set that calculated the time-based performance of 30 major tech-focused IPOs since May 2012. The silver lining is that 43% of the 30 stocks analyzed finished higher one year after their debut.
However, several of these IPOs endured jaw-dropping year-one max drawdowns. On average, these 30 tech-powered IPOs tumbled 55% from peak to trough in their first year, with 11 plunging between 64% and 90%. It’s worth noting that SpaceX shares dove as much as 54% from their all-time high.
Truist’s data set shows that retail investor euphoria quickly fades once a company goes public and attention turns to its operating performance.
Anthropic’s valuation can’t be historically justified
Several decades of history also show that premium valuations aren’t sustainable over the long run.
Though “value” is a subjective term that can vary from one investor to the next, the arbitrary line in the sand that’s helped identify bubbles over the last couple of decades is a price-to-sales (P/S) ratio above 30. Before the dot-com bubble burst, industry titans Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Cisco Systems (NASDAQ:CSCO) all faltered at trailing 12-month (TTM) P/S ratios north of 30.
While Anthropic’s annualized revenue run rate reached $65 billion in July, its TTM sales total roughly $19.7 billion through the end of June. If Anthropic’s market cap lands between $1.5 trillion and $2 trillion, it’ll sport a P/S ratio of 76 to 102!
Even on an annualized run rate basis, Anthropic’s valuation doesn’t escape historical bubble territory.
Image source: Getty Images.
Next-big-thing innovations have historically endured bubble-bursting events
History also shows that game-changing tech innovations are prone to bubble-bursting events.
Since the advent and proliferation of the internet in the mid-1990s, every hyped technology has navigated a bubble that burst. These bubbles form and burst because investors consistently overestimate how quickly new technologies will be adopted and optimized.
Similar to the internet, artificial intelligence (AI) doesn’t face any issues with adoption. Businesses are spending freely to build-out their AI infrastructure or to integrate AI solutions into their platforms.
However, companies are still a long way away from optimizing AI solutions to boost sales and profits. It took until several years after the dot-com bubble burst for businesses to optimize internet-based solutions. The AI revolution is likely on a similar trajectory.
Based on historical precedent, the Anthropic IPO will end in disappointment for retail investors.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again
In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. If you’d invested $5,000 then, you’d be sitting on $2,799,718 today.*
Now, for the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. It’s a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast.
Continue »
*Stock Advisor returns as of October 30, 2026.
Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Cisco Systems, Microsoft, and Truist Financial. The Motley Fool has a disclosure policy.
