Burry rules out buying Anthropic shares. What risks does he see?

Famed short seller Michael Burry, who predicted the 2008 mortgage crisis, says he does not plan to buy shares in AI startup Anthropic, which is preparing for an IPO. In a recent post on his Cassandra Unchained blog, he analyzed the company’s financials from its amended Form S-1 and explained why he doubts the sustainability of its business. What risks does Burry see ahead of the company’s potential IPO?

Anthropic is so dependent on exceptionally high revenue growth that without it, the company will be unable to cover its computing and infrastructure costs, Burry writes. In its amended IPO filing, the company disclosed $895.4 billion in commitments. Its eventual commitments could be substantially higher, however: that figure excludes spending under contracts with AMD and purchases of Google TPU computing capacity for 2028-2031, Burry noted. Anthropic itself estimates those costs at $150-175 billion. Including them brings total commitments to $1.05-1.07 trillion, on Burry’s numbers.

Even that may not be the final figure: Burry argues that the prospectus does not make clear whether the disclosed $895.4 billion in commitments includes contracts with SpaceXAI worth up to $120.5 billion. If those contracts are only partially included or excluded altogether, he estimates that Anthropic’s total commitments could rise to $1.17-1.19 trillion.

Burry believes the uncertainty surrounding the SpaceXAI contracts also complicates estimates of spending over the coming year: Anthropic’s payments through the end of September 2027 could reach $100.8 billion, versus the $69.8 billion disclosed in the filing.

Burry stresses that Anthropic needs exceptionally high revenue growth to cover all its costs. He estimates revenue must grow 11.6% each month to cover spending in 2027. Achieving a 20% GAAP profit margin would require monthly growth of 16.1%.

Yet Anthropic’s revenue growth has slowed considerably, Burry writes: the top line rose 132% quarter over quarter in the first quarter and 144% in the second, but just 46.7% in the third. He suggests the slowdown reflects a pullback in excessive token use: media reports indicate that companies have become more economical in their use of computing resources.

Meanwhile, Anthropic’s computing and infrastructure costs are rising faster than revenue, increasing 77.5% in the third quarter. The company has had to buy additional capacity under more expensive short-term contracts and warns that its use of this capacity will continue to weigh on margins.

To reduce those costs, Anthropic is developing its own computing infrastructure, Anthropic Direct. But Burry sees risks in that approach, too: the company is signing five-year leases for Broadcom equipment and data center leases lasting up to 20 years, exposing itself to the risk of technological obsolescence. In effect, Burry argues, Anthropic is entering into a noncancelable “take-or-pay” contract with itself: it becomes the sole customer for its own computing capacity and assumes all the costs of maintaining it, regardless of whether it needs that capacity.

If Anthropic’s financial performance deteriorates, it could lose access to some financing from strategic partners, Burry warns. Agreements with Google, Amazon, and Broadcom could provide the company with up to $77 billion: $20 billion from Google, $15 billion from Amazon, and $42 billion from Broadcom. In its prospectus, Anthropic lists this support alongside its own liquid assets and an undrawn bank credit facility. Under these agreements, the partners are willing to accept Anthropic securities as payment for equipment leases and other services.

Obligations to Amazon pose another risk. The tech giant has invested billions of dollars in Anthropic and also holds convertible notes issued under financing agreements in 2023 and 2024. Converting the notes into shares could dilute other Anthropic shareholders after the IPO, Burry warns. On his numbers, Amazon’s stake could reach 20.6% if it converted all its notes into shares. The agreements, however, cap Amazon’s ownership of Anthropic at 12% on an as-converted basis. Burry believes Amazon could work around that limit by retaining some of the notes and converting them later, when the total share count increases after the IPO.

The rising value of the convertible notes held by Amazon creates another problem for Anthropic: the AI startup records that increase as a loss, even though no cash changes hands. From the end of June to the end of September, the notes’ carrying value rose from $108 billion to $130.5 billion. Burry expects their revaluation to continue to have a substantial effect on Anthropic’s reported earnings after the IPO.

Optimistic expectations for revenue growth are already reflected in Anthropic’s valuation, but sustaining that growth has become a matter of “existence” for the company itself, Burry writes. He believes the market has already taken notice of the scale of its commitments but fears investors will grasp the full gravity of the situation only in hindsight.