The stock market 'dodged a real bullet' — Cramer on Anthropic's new IPO valuation
Anthropic’s new valuation projection signals a sigh of relief for the volatile AI trade, which has come under additional pressure since the Democratic wave in last week’s midterms. Updated IPO paperwork filed Tuesday showed that Anthropic plans to offer 825 million shares of Class A common stock at a price range between $70 and $78 each. At the high end of that range,Anthropic would generate $64.35 billion, giving the company a stock market value of up to $1.405 trillion on a fully diluted basis. That’s a significant jump from the $965 billion valuation announced as part of a funding round back in May. The frontier AI lab plans to price its offering on Nov. 18, before making its public market debut the next day. “[When that happens] we would be saying, ‘You know what? We’ve just dodged a real bullet,'” Jim Cramer said on CNBC after the filing. “When Anthropic is done, we’re clear sailing to Christmas.” During last Friday’s Annual Meeting for the Club, Jim said that a successful public debut for the Claude creator is critical to stabilizing trading in stocks tied to AI. Jim emphasized the stakes on “Mad Money” on Monday evening ahead of the updated filing. Anthropic’s IPO pricing range, estimated valuation, and trading timetable come at a crucial time for Wall Street, as investors worry about the tons of cash being poured into artificial intelligence infrastructure and how companies will get a return on those investments.Those concerns have only intensified amid a string of negative headlines that have put additional pressure on an already fragile market. “We really needed something positive. We needed something good,” Jim said, especially since the barrage of negative headlines on top of the election concerns about the data center buildout slowing. On Sunday, we found out that Nvidia ‘s board is investigating CEO Jensen Huang’s affair with a suspected Chinese spy. That story and the two-session slide in Nvidia stock have been dominating the headlines ever since. Early Tuesday morning in London, Federal Reserve Governor Christopher Waller suggested that a larger-than-usual half-point interest rate increase could be warranted in December. Hours later, a hotter-than-expected October consumer price index added to the case for a half-point hike. According to the CME FedWatch tool, the market odds of a half-point move increased to about 13% from zero percent on Monday. A quarter-point increase is still basically a lock at roughly 87%, only a few percentage points higher than before. According to Jim, the Anthropic IPO could be the real clearing event for the market. While uncertainty about Nvidia remains, he believes the broader AI investment case is still solid even if Huang were forced to leave the company. That’s due to the value over time of Nvidia’s graphics processing units (GPUs), which have been an integral driver of the artificial intelligence boom. Anthropic is a big user of chips from Nvidia and others, touching all corners of the AI ecosystem. In Tuesday’s filing, the company said it has achieved success “through our research breakthroughs and our multi-chip compute architecture across AWS Trainium, Google TPUs, Nvidia GPUs, and AMD GPUs, enabling us to orchestrate workloads to optimize for price and performance.” AWS Trainiums are among Amazo n’s custom chips. TPUs are custom chips from Alphabet ‘s Google. In addition to the $64 billion Anthropic stands to make on the IPO of the Class A shares, the company plans to sell $26 billion of Class N stock in a private placement to Nvidia, Google, Advanced Micro Devices , Broadcom , Micron , Microsoft , and Taiwan Semiconductor Manufacturing . All of these companies already have stakes or strategic partnerships with Anthropic. “We get this deal done at a good price. They pay the people that need to be paid,” Jim said. “And, maybe we don’t have a lot that’s bad between here and the end of the year.” Also, in the what can go right column, Jim pointed to the possibility of further declines in oil prices, pending no escalation of conflict with Iran, which could help ease inflation pressures and potentially keep the Fed from hiking rates too much. “I know that’s a real pan-gloss view, but I think that I’ve seen stranger ones,” he concluded. (Jim Cramer’s Charitable Trust is long NVDA, GOOGL, AMZN, MSFT, MU. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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