Biggest Winner of Anthropic's IPO: Amazon's $18.6 Billion Investment Becomes $258 Billion, Google Locks in $100 Billion Cloud Deal
Author: Martin Peers, The Information
Compiled by: TechFlow
TechFlow Summary: The IPO prospectus updated by Anthropic on Tuesday brought the stakes and book returns of Amazon and Google into focus for the first time: at the midpoint of the offering range, Amazon's ~$18.6 billion investment translates to roughly $258 billion in equity value, while Google's ~$33 billion investment corresponds to about $132 billion.
More noteworthy to investors are the cloud spending commitments in the prospectus that must be fulfilled “regardless of actual usage”: at least $121 billion on Google Cloud and at least $110 billion on AWS.
For those who cannot buy or do not want to chase the high price of Anthropic’s new shares, these two companies offer a ready-made indirect route; however, Anthropic is also encroaching on their turf in software, making the calculus multi-sided.
Image: Left is Amazon CEO Andy Jassy, right is Google CEO Sundar Pichai, image from Getty Images
If you're looking for a cheaper way to gain exposure to Anthropic than buying its stock directly, consider Amazon or Google. The IPO prospectus updated by Anthropic on Tuesday showed how many shares each tech giant will hold and how much profit they've made from early investments in this AI company.
Neither tech giant will hold voting shares in Anthropic, so antitrust regulators need not worry about their influence over management. But their stake sizes are quite substantial.
Theoretically, Amazon could hold about 20% of Anthropic's outstanding shares. However, due to a self-imposed ownership cap, Amazon's direct holding will not exceed 12%, with the remainder being convertible notes that can be converted into equity over time. Either way, Amazon's economic return is highly significant.
Ignoring the ownership cap for a moment, at the midpoint of Anthropic's proposed IPO pricing range, Amazon's entire ~20% stake would be valued at around $258 billion, against its total investment of approximately $18.6 billion. (Anthropic's final IPO price is likely to be higher than the initial range, hinted by a report from the UK's Financial Times tonight.)
Google's return is less impressive. It will ultimately hold about 10% of shares, worth $132 billion, corresponding to an investment of roughly $33 billion. Still, that's not bad!
Both Amazon and Google have committed to making additional investments in Anthropic through 2030 under certain conditions, meaning their investments could grow further. (Google's stake is also capped at 14.99%, which will limit how quickly it can convert newly issued convertible notes from future investments into equity.)
Moreover, these figures only cover the equity investment portion. Both Amazon and Google are also destined to secure significant cloud business from Anthropic.
Anthropic's latest prospectus states that it has committed to spending at least $121 billion on Google Cloud before July 2033, “regardless of actual usage.” Additionally, it has pledged to spend up to $150 billion more to purchase computing power utilizing Google's TPU AI chips.
Anthropic has also committed to spending at least $110 billion on Amazon's cloud services before 2036, again “regardless of actual usage.” Anthropic has made similar commitments with Microsoft ($49 billion in total through 2033) and SpaceX (up to $120.5 billion through 2029).
Anthropic is competing with large tech companies in the AI space, and increasingly in software. For example, on Tuesday, after Anthropic launched a new office productivity app competing with Microsoft and Google's offerings, both companies' stocks fell.
But this industry involves tradeoffs. Anthropic's very existence was fueled by technological advancements driven by large tech companies keen on securing more cloud business. And these bets have yielded exceptionally strong returns for them.
CoreWeave's New Financing Tactics
For neoclouds seeking financing methods to fund data center expansion, getting customers to pay “in advance” has become a popular practice, especially amid soaring interest costs. CoreWeave is the latest neocloud to publicly emphasize the benefits of upfront payments.
"Seventy percent of our deals this year involved upfront payments, with customers paying as much as 100% of the contract value in advance," CoreWeave CEO Michael Intrator said on a Tuesday call.
But any client paying upfront for compute may demand concessions. If interest rates are low, borrowing money might be cheaper than offering price discounts to secure upfront payments.
In fact, CoreWeave has not always favored upfront payments. In February, Intrator boasted that thanks to lower funding costs, CoreWeave could reduce its reliance on prepayments, calling it "very exciting for us."
Intrator said on Tuesday that current interest rate levels make upfront payments more attractive. "Looking ahead, at current yield levels, we will not finance our business through the unsecured debt market," he said.