Key points
- Anthropic's IPO filing discloses $895bn in compute commitments, $437bn noncancelable, more than its valuation eight months earlier.
- Ed Elson predicts Anthropic will be more unprofitable than ever next year, calling the implied path to profitability a red herring.
- Hyperscalers raise over $300bn in ten months and every one except Microsoft is now cash flow negative.
Anthropic's IPO filing reveals the AI boom's hidden bill
Anthropic's IPO filing is the first real look at whether an LLM maker works as a business. It shows $33bn of revenue in nine months next to $895bn of compute commitments, $437bn of them noncancelable, so the company is going public for roughly $100bn to pay bills it cannot otherwise meet. The wider boom is financed by capital markets, and after three years of effortless demand the terms are tightening.
Takeaways
- Anthropic's filing discloses $895bn in compute commitments. The amended filing shows $895bn of purchase commitments, nearly all for compute. About $70bn is due within twelve months and $450bn more by 2030, more than $100bn a year against $19bn spent this year. Some $437bn is noncancelable.
- The implied path to profitability is a red herring. Ed Elson predicts Anthropic will not be profitable next year and will be more unprofitable than ever. Its filing warns of substantial capital expenditures, and despite a war chest above $130bn it is going public for roughly $100bn to pay its bills.
- Pure-play LLM makers remain unproven as businesses. Four years after ChatGPT launched, no pure-play LLM maker has shown it can make more than it spends. Revenues and losses have both exploded, and Elon Musk has admitted Grok's business model is not working. Ed Elson calls the sector unproven rather than doomed.
- AI spending has turned most hyperscalers cash flow negative. Over the past ten months Microsoft, Meta, Amazon, Google and Oracle raised more than $300bn in debt and equity to build data centers. With roughly $800bn of AI spending this year, every hyperscaler except Microsoft is now cash flow negative.
- The real test of capital comes in 2027. Ed Elson says next year's fundraising will be even crazier than the past ten months, and Morgan Stanley estimates hyperscaler debt issuance could exceed $1tn by 2028. Meta has planned another $60bn equity offering in 2027. Cheap capital makes the spending commitments survivable.
- Anthropic's IPO is the biggest signal to watch. Demand for the listing, expected within two weeks, should be through the roof, and anything less will look like something has gone wrong. His conclusion is that capital markets are temperamental and should never be depended on.
The music is going out of tune
- CoreWeave's bond yields have risen to 15% and many neoclouds have seen their valuations cut in half, signs that lenders are repricing AI infrastructure.
- The Financial Times reported that Anthropic will not get the investment-grade credit rating it wanted, and OpenAI cut its funding target by $10bn.
- Demand is still there. Meta's $25bn stock sale was five times oversubscribed and Amazon's $25bn bond deal drew $62bn in orders.