Space Exploration Technologies (SPCX -1.84%) beat the record for the largest IPO ever when it went public in June. The space company raised $75 billion, valuing the stock at $1.77 trillion. SpaceX's record is still fresh, but it may not last much longer as Anthropic, a leading developer of large language models (LLMs), prepares to go public soon.
Image source: The Motley Fool.
The massive AI opportunity
Anthropic makes money by selling access to its family of Claude LLMs to individuals and enterprises. Some might argue that it shouldn't be valued higher than SpaceX. After all, the rocket company has been a pioneer in its field, and its breakthroughs have substantially decreased the cost of space travel. SpaceX is the runaway leader in the space launch industry and generates meaningful revenue from contracts with various government agencies. SpaceX is also ahead of its competitors in innovation.
The company is working on a next-gen rocket, Starship, designed to be fully reusable. SpaceX could once again change the economics of space travel thanks to Starship. However, SpaceX itself argued that its most important opportunities are in the AI industry, and it's not even close.
The rocket company estimated a total addressable market (TAM) in AI of $26.5 trillion, and a TAM of $28.5 trillion across its entire business. SpaceX's accomplishments in the space industry have been impressive over the past two decades -- that's an established track record of breakthroughs and eventual market dominance that Anthropic arguably doesn't have in AI. But SpaceX's valuation is largely a function of its AI opportunities, and Anthropic is performing extremely well in that industry.
NASDAQ: SPCX
Key Data Points
According to some reports, Anthropic's annualized revenue run rate topped $65 billion at the end of July. That's higher than SpaceX's annualized revenue run rate of about $31.2 billion as of its latest quarter. Further, Anthropic has been growing rapidly. The company's second-quarter revenue was above $11.5 billion, up 143% quarter over quarter and an impressive 1,361% higher than the year-ago period.
Also, Anthropic's adjusted operating income is positive, which is no easy feat, given the level of investment required to provide its services. Training frontier AI models isn't cheap. Given all that, it's not surprising that Anthropic is expected to beat SpaceX's IPO record when it does go public, which could happen as soon as next month. But should investors buy the stock as soon as they have the chance?
SpaceX's recent IPO offers a useful case study. SpaceX has essentially moved sideways since its IPO, despite soaring as high as $225.64 at one point and posting excellent second-quarter financial results. Most of what SpaceX has accomplished since going public was arguably already baked into the share price. Something similar could happen with Anthropic. Despite its rapidly growing revenue and massive opportunities in the AI industry, at a market value of $2 trillion or more, the upside might be limited. That's why I'd hold off on buying Anthropic's shares when the company goes public.
