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It normally takes a lot more than three companies to create an initial public offering boom. But if those three companies are SpaceX, OpenAI and Anthropic, Wall Street may soon find itself in the middle of an IPO boom for the ages.
In one of the first clear signs that some of the most valuable private tech companies have set the wheels in motion to go public, the Financial Times last week reported Anthropic had appointed lawyers to lay the groundwork. That puts it a step ahead of OpenAI, which is also considering an IPO. Reports in recent days, first by Bloomberg, suggest Elon Musk’s rocket company SpaceX is also gearing up to go public.
It’s not hard to see why. Private equity investors have provided huge amounts of capital for these companies, but they have their limits. OpenAI has raised $41bn of equity this year and will need much more before turning a profit. SpaceX is reported to be planning to raise more than $30bn in an IPO.
They would fill a useful niche for public market investors. As pure-play model builders, OpenAI and Anthropic would provide a new way for Wall Street to bet on artificial intelligence. And SpaceX, which accounted for more than half of all rocket launches last year, would be unrivalled as a wager on the future space economy.
If all three go public at roughly the same time, possibly next year, it would be an extraordinary moment for Wall Street. The headline numbers would be head-spinning. SpaceX is hoping to be valued at $800bn in its latest private share sale, while Anthropic is targeting $350bn. OpenAI’s most recent share sale was at $500bn.
Given that anyone investing now would be hoping for another big lift before IPO day, the eventual numbers, if all goes to plan, would be much larger still. Any one of these would put the previous record for a tech IPO — the valuation of more than $230bn Alibaba achieved in its 2014 debut — in the shade.
They might also break new ground with the scale of their losses and need to convince investors of the sustainability of their business models.
One indicator of the amount of red ink OpenAI is spilling has come from Microsoft, which put its share of the AI company’s losses at $4.1bn in the latest quarter. Given that it owned about a third of the company, that suggests the ChatGPT maker as a whole may have lost roughly $12bn — a daunting figure, though one-off factors or other things may have inflated the number.
At the same time, though, the growth of OpenAI’s business since the launch of ChatGPT has been nothing short of spectacular, and another year or 18 months could make a huge difference.
Its revenue has grown in rough proportion to its data-centre capacity, roughly tripling in each of the past two years, said a person familiar with its finances. With just under 2 gigawatts of capacity, it is ending this year with revenue at an annualised rate of $20bn. The company’s plans call for capacity to jump to 6GW — 6.5GW by the end of next year. It seems cautiously optimistic that the pattern will hold, putting the revenue run-rate at $60bn by the end of 2026, though a number of questions around the timing of its ability to monetise its new data centres may complicate the picture.
Even when they are willing to back lossmakers, though, public markets have a way of turning up the heat. Uber, the last big lossmaking tech company to list, faced intense pressure in its early years. It was not until after it reported its first operating profit years later that its shares finally found a sustainable level above the IPO price.
Then there is the question of governance. Wall Street has been open to tech companies that concentrate voting power in the hands of founders. It has less experience of groups whose missions might put them at odds with the interests of their shareholders.
A fundamental question hangs over the crop of mega-IPO candidates. Does OpenAI see ChatGPT and others as a way to fund its original mission, which was to make sure AI benefits all of humanity? Or is it a profit-maximising business that just happens to see helping humanity as a side-benefit?
A similar question hangs over SpaceX. If Musk’s overriding goal is to get to Mars — the reason he said he set the company up — what kind of trade-offs might his company make between profitability and space exploration?
The stock market, though, has shown plenty of appetite for one Musk stock, lifting Tesla well above its possible value as a pure car company. Given the chance to invest in the dominant commercial rocket company, there is every reason to believe it would welcome a second.
richard.waters@ft.com
