There is a lot of excitement about the upcoming Anthropic initial public offering (IPO), which is expected to happen potentially as soon as October.
The artificial intelligence (AI) company, which produces the Claude chatbot, is expected to be one of the biggest IPOs ever, if not the biggest. Experts project it could raise as much as $100 billion, which would beat the previous high of $86 billion by SpaceX and be valued at $2 trillion.
How investors will react to the IPO is uncertain. But what's perhaps more certain is that the brokerages that handle the IPO will get a huge boost from this IPO.
For the SpaceX IPO, the investment bank that was the lead advisor, Goldman Sachs (GS -0.52%), saw shares rise to an all-time closing high of $1,152 per share on July 15. It was not a coincidence.
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SpaceX IPO generated $500 million in fees for advisors
That run to an all-time high by Goldman Sachs was fueled by a 24% increase from the date that it became public that Goldman Sachs was a lead advisor, May 20, to the date of its second-quarter (Q2) earnings report, July 15.
The Q2 earnings report showed that Goldman Sachs had record revenue of $20.3 billion. That was fueled by record revenue in global banking and markets of $15.5 billion, up 53% year over year, and that was driven by a 55% increase in revenue from investment banking.
NYSE: GS
Key Data Points
Morgan Stanley (MS -0.83%) was the other lead advisor for the SpaceX IPO, and its stock price rose 20% from May 20 through July 15 when it reported blowout Q2 earnings, with record net revenue of $21.3 billion and a 60% increase in investment banking fees.
In both cases, the huge revenue spikes were fueled by the SpaceX IPO. According to The Wall Street Journal, each of the investment banks made $100 million in fees from the SpaceX IPO alone.
The total pool of fees that went to all of the investment banks working on the IPO was $500 million, according to the Journal. Those banks included Bank of America, JPMorgan Chase, and Citigroup.
Goldman Sachs and Morgan Stanley are buys
The same two banks, Goldman Sachs and Morgan Stanley, have reportedly been named the lead advisors for the upcoming Anthropic IPO.
JPMorgan Chase, Citigroup, and Barclays are also expected to provide services as part of the IPO.
Should we expect to see a similar jump for both of these stocks? The short answer is, yes. It is anticipated that the Anthropic IPO should generate similar fees for the investment banks, perhaps even slightly more given the higher projected valuation.
It is a particularly good time for investors to consider these two major investment banks leading into the Anthropic IPO. That's because both of them have come off their all-time highs set back in July.
NYSE: GS
Key Data Points
Goldman Sachs stock has dropped 15% from its July all-time high to $976 per share, while Morgan Stanley stock has plummeted about 10% from its July high to $206 per share.
That gives an investor a chance to get both of these stocks on the dip before the Anthropic IPO comes out. Goldman Sachs is trading at just 15 times earnings and 13 times forward earnings, while Morgan Stanley has a price-to-earnings (P/E) ratio of 16 and a forward P/E of 15.
Both are great buys right now, with Goldman Sachs' median price target of $1,200 per share representing a 23% increase. Morgan Stanley has a median price target of $247.50, indicating a 20% increase.
They both should have the double catalyst of the IPO coming out in October followed by Q3 earnings reports in October, which should reveal strong revenue gains.
