An analyst who predicted the market crash called the potential event more important than the election

The potential debut of Anthropic, the world’s most valuable AI startup, on a U.S. stock exchange could prove to be a more significant event for the market than the U.S. midterm elections, according to HSBC Holdings strategist Max Kettner. This analyst was one of the few on Wall Street to downgrade U.S. stocks ahead of the sell-off that rocked the market on November 5, Bloomberg notes.

Anthropic’s IPO in two weeks—if it goes ahead—is likely to be a major event for the market that will help alleviate risks related to the overvaluation of AI companies and a possible continuation of the sell-off in their shares, said Max Kettner, a strategist at HSBC Holdings.

“The best-case scenario, perhaps, would be for the company to go public with a valuation of $1 trillion, rather than $1.5 trillion,” Bloomberg quotes Kettner as saying. “You need to go public with a valuation low enough so that the stock can actually start to rise on the secondary market. Or at least not plummet by 20–30% in the first week, because that, of course, would be terrible.”

Anthropic’s planned initial public offering faces a number of obstacles, according to Bloomberg. The sell-off of shares in AI-related companies has made market conditions less favorable. At the same time, the change in political leadership in Washington could alter expectations regarding Anthropic’s ability to operate under new political conditions, the agency reports.

Ahead of the official launch of the IPO roadshow to investors next week, potential buyers are discussing a valuation for the AI developer in the range of $1.2 trillion to $1.3 trillion, according to Bloomberg sources. According to one of the agency’s sources, some investors are even considering a valuation as low as $1.1 trillion.

One factor that could limit Anthropic’s valuation is competition with OpenAI for a higher market value, according to Bloomberg. In May, Anthropic surpassed OpenAI in valuation, reaching $965 billion in its latest funding round. OpenAI is now seeking a new round of funding based on a valuation of $1.25 trillion.

Anthropic’s valuation benchmarks for its upcoming IPO have changed several times: a prospectus that was leaked in September indicated a target market capitalization of over $2 trillion. By mid-October, some investors had lowered their expectations to approximately $1.5 trillion amid a slowdown in revenue growth—in the third quarter, revenue increased by 50% to $16.8 billion, following more than a twofold increase in the previous quarter.

In recent years, Max Kettner has become known as one of the first strategists to predict the current bull market, according to Bloomberg. However, last month, for the first time in a long while, he reduced his equity holdings due to sharp swings in investor sentiment ahead of the midterm elections. Kettner was one of the few Wall Street analysts who downgraded U.S. stocks ahead of the sell-off that rocked the market on November 5, Bloomberg notes: Two weeks ago, he withdrew his recommendation to buy U.S. stocks, adopting a neutral stance on them. He explained that market conditions in the technology sector had deteriorated, regardless of how companies approach capital expenditures.

Kettner drew a parallel between the current situation and January–February 2018, when volatility-linked investment products collapsed. He warned that the current sell-off resembles a mass liquidation of positions triggered by the unwinding of strategies based on the continuation of market trends rather than a genuine reassessment of companies’ fundamental prospects.

The strategist believes that the bet on AI remains generally justified, despite this week’s massive sell-off. Kettner believes that the decline in hyperscaler stocks is likely to come to a halt, as the growing shortage of computing power and rising rental costs benefit companies that already have such capacity and can provide it to their customers. He also suggested that semiconductor manufacturers’ stocks could at some point “soar 20–30% in two days simply due to a sharp unwinding of short positions.” However, the strategist acknowledged that he does not know exactly when this might happen.

This article was AI-translated and verified by a human editor