What SpaceX’s IPO means for OpenAI and Anthropic

ByTech Word News

Wall Street celebrated the arrival of the largest initial public offering in its history with SpaceX on Friday. But after SpaceX’s first day of trading ends, the pair of San Francisco startups will be keeping a close eye on the share price of Elon Musk’s rocket company.

OpenAI and Anthropic, two of the leaders in artificial intelligence, have also announced their intention to go public as early as this year. While AI is only one component of SpaceX’s business, how SpaceX fares among investors will be a crucial measure of how the average person feels about investing in the IPOs of other AI companies, which are believed to be far from profitable.

Here are three things these companies are most likely considering:

The IPO market has been turbulent for 10 years, as some of the most high-profile tech companies have been able to delay going public for longer due to their seemingly endless ability to raise private capital.

However, SpaceX’s debut may kick off a successful year for tech companies heading to Wall Street. Anthropic and OpenAI will be watching SpaceX trade over the next few months to see if the markets are hungry for more tech company stock.

The total value of SpaceX’s stock was close to $2 trillion on Friday, easily making it the largest IPO of all time. But if OpenAI and Anthropic go public, they won’t be far behind. Both are expected to be worth just under $1 trillion.

It is always difficult for bankers to time an IPO “right”, especially recently, given the instability of the global economy. But SpaceX’s Day 1 pop could offer hope that there is plenty of investment interest.

Everyday investors were willing to stomach money-losing tech companies in previous booms — until they weren’t. The dot-com boom of the 1990s was followed by a brutal crash in tech stocks.

A similar pattern followed the next generation of technology companies that went public more than a decade later. In 2019, Wall Street turned away from companies with balance sheets covered in red ink. The year Uber, which isn’t expected to turn an operating profit until 2023, went public, its stock market debut lost more in dollar terms than any other US initial public offering since 1975.

If there’s one thing AI companies are known for, it’s losing huge amounts of money. Last year, OpenAI made about $13 billion, according to a person with knowledge of the company. But it expects to spend roughly $100 billion over the next four years. Less is known about Anthropic’s financial situation, but the company has regularly talked about the costly nature of its work, and analysts believe the company does not regularly made a profit.

The initial surge in SpaceX’s share price suggests that profitability has once again taken a backseat to growth and an industry buffer. That could be positive news for Anthropic and OpenAI, which have a great name and are spending as fast as they grow. AI companies are expected to spend billions renting computing power from data centers to research new products and support existing ones.

A strong debut for SpaceX could be good for the overall market, but executives at Anthropic and OpenAI may not be too keen. too good of the day for SpaceX.

When companies of a similar class consider going public, they often compete with each other. There are always concerns that interest in the second or third big IPO of the year could wane.

Of course, if traders invested early in SpaceX just to see the company’s valuation tank, that may deter them from taking a gamble on OpenAI or Anthropic.

(The New York Times sued OpenAI and Microsoft in 2023, accusing them of copyright infringement for news content related to AI systems. Both companies denied the claims.)