Nvidia’s $10bn bet on Anthropic IPO, and chip guarantees behind AI borrowings | HT Explainers
Jensen Huang’s exit as Nvidia’s chief executive, a week before Anthropic is due to begin trading in what could be the biggest stock market listing on record, has put a spotlight on the chipmaker’s $10 billion pledge to the artificial intelligence (AI) company, and on how chipmakers’ balance sheets prop up the AI industry’s borrowing.
Anthropic CEO Dario Amodei and Nvidia's Jenson Huang, after a meeting with technology executives about artificial intelligence at the White House in Washington, DC. (AFP File Photo)“A leadership transition could prompt Nvidia’s board to reassess the size, timing or strategic rationale of the commitment to Anthropic,” Mandeep Singh, an analyst at Bloomberg Intelligence, wrote in a note on Wednesday.
Huang resigned from Nvidia on Thursday following reports of affairs, one of which involved a woman that US officials believe was spying for China. Beijing has denied the allegations.
Anthropic, the maker of the Claude chatbot, has put 825 million shares on offer at $70 to $78 each, which would raise up to $64.4 billion and value the company at up to $1.4 trillion, Reuters reported. The shares are expected to start trading on Nasdaq under the symbol ANT on November 19, according to Bloomberg.
Alongside the IPO, seven technology companies have agreed to buy $26 billion of shares at the IPO price in a private placement, Anthropic’s filing shows. Nvidia and Google are each buying about $10 billion, AMD about $2.5 billion and Broadcom, Micron and Microsoft about $1 billion each, with chipmaker TSMC taking about $500 million. Together, the two sales could raise as much as $90.4 billion, more than SpaceX’s $75 billion listing in June.
The IPO has drawn about six times as many orders as there are shares on offer, Bloomberg reported, citing people familiar with the matter. Anthropic’s revenue was $17 billion in the three months to September 30, its filing shows. Its revenue run rate, a measure that annualises current sales, reached $81 billion at October 31, up from $65 billion at the end of July, according to Bloomberg.
The placement depends on the IPO going ahead and on “the satisfaction of certain conditions”, according to the filing. Singh said any delay or cut by Nvidia “could weaken an important signal of support for Anthropic’s IPO pricing at around $1.4 trillion, though commitments from Google and other strategic investors might limit the financing impact.”
Anthropic declined to comment to Bloomberg, and Nvidia did not immediately respond to a request for comment.
“For now, it looks like the deal will go through,” Matt Maley, chief market strategist at Miller Tabak, said in a note to clients, adding that the Nvidia revelations did not seem to be having an outsize impact on Anthropic.
Under Huang, Nvidia was dubbed “the central bank of AI”, taking stakes in companies and guaranteeing deals across the industry to bolster confidence, Bloomberg reported.
The guarantees matter in chip leasing, a market that has grown rapidly as AI companies race to secure expensive processors. In a typical deal, a specially created company borrows money to buy the chips and leases them to an AI firm. If the lease payments stop, the chips are leased to someone else or sold to repay the debt.
A chipmaker’s guarantee, known as residual value support, covers any shortfall that remains. That brings in more lenders, helps the debt win higher credit ratings and lowers borrowing costs, according to Bloomberg.
Nvidia has said it would cover up to 25% of a deal, while Broadcom has gone further. In May, it guaranteed $30 billion of a $35 billion debt deal under which Anthropic leases tensor processing units (TPUs), AI chips made by Broadcom and Google. It is backing about $43 billion of a second $63 billion deal that will also support Anthropic.
The difference had complicated Nvidia’s own financing push before Huang’s exit. In August, he stood alongside executives from Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs and KKR to announce a platform to finance $500 billion of AI computing deals. Months later, no deals had emerged, and some customers and Wall Street partners had pressed Nvidia to raise its 25% backstop, Bloomberg reported, citing people familiar with the talks. The earliest Nvidia could announce a deal is likely January, assuming Huang’s departure does not derail the project.
A bigger guarantee would mean more risk for Nvidia, but holding at 25% could make its chips harder for customers to afford and its deals less attractive to lenders.
Anthropic spreads its work across four chip suppliers, describing a “multi-chip compute architecture across AWS Trainium, Google TPUs, NVIDIA GPUs, and AMD GPUs” in its filing.
“The S-1 showed Anthropic has appropriately hedged their AI accelerator sourcing and have positioned themselves not to be too reliant on Nvidia,” said Luke Lango, chief technology analyst at InvestorPlace. The filing also warns that relying on cloud providers and suppliers that have “strategic and investment relationships” with the company “could give rise to conflicts of interest”.
Nvidia reports quarterly results on November 17, two days before Anthropic’s debut. “If the shares of Anthropic can trade well in the days/weeks following the IPO, investors just might be able to push past the Nvidia scandal,” Maley said.
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