Artificial Intelligence | Dance on the AI ​​volcano

The AI ​​financial world is like a volcano that may be about to erupt. Photo: dpa/Henry Holdsworth Anthropic, one of the largest artificial intelligence (AI) companies, is planning a superlative IPO for mid-November: with a total volume of 1.5 to 2 trillion dollars, it is expected to be the largest in US history.

The IPO appears to be perfectly timed as traditional capitalization for the AI ​​industry becomes increasingly uncertain. Particularly high-profile recently was a mega-debt financing that almost failed. This deal between Anthropic, the major banks Morgan Stanley, Citigroup and Bank of America as well as the chip producer Broadcom is typical for the industry. Anthropic needs large quantities of highly specialized chips for its data centers, but not all of them can be bought, but rather rented from the producers. Even this has to be financed through loans. This was achieved this week – at $63 billion, it was the largest debt financing for AI infrastructure to date.

Significantly, the producer of these chips himself stepped into the breach. Broadcom, based in Palo Alto in Silicon Valley, is guaranteeing more than $40 billion in loans if Anthropic runs into payment problems. In addition, Broadcom boss Hock Tan promised the banks a higher interest rate at the last minute so that the deal could go through. And the final tranche of this megadeal was organized by the investment company Blackstone. These complex collaborations are quite unusual.

Observers assume that banks are becoming increasingly uneasy about AI financing. They would like to resell their debt securities on the secondary market for a profit, but this has become increasingly rare in recent times. The banks often prefer to keep the papers. The appetite for further lending is shrinking accordingly.

Stock investors are also becoming more cautious: Broadcom is already seen as a symbol of a rapidly growing high-tech company that is still having problems on the stock market. When the chip company posted an expected increase in sales to $115 billion in the coming financial year at the beginning of September, the price fell significantly. Investors had expected a significantly larger increase. The shares have been languishing at a low level ever since.

The enormous impact of the AI ​​expansion is also becoming a significant problem for the US Central Bank.

The tech giant Alphabet (Google) also ran into astonishing problems this week: On Thursday, the stock lost almost half a trillion dollars in market value, not despite its strong position in the AI ​​sector, but precisely because of it. Investors are worried that the costs of expanding AI globally could outweigh the returns.

Analysts like Paul Kedrosky from the Institute for Digital Economy at MIT therefore warn that the mega IPOs currently are fundamentally different from classic IPOs, with which a growing company has to raise capital at the beginning of its rise. Similar to Space-X in June, Kedrosky believes the Anthropic IPO is more like an “exit strategy” by the founders. They wanted to monetize their assets at a time when the main growth had long since occurred. The founders make money from the high issue prices of the shares, while the new investors take full risk that the future may become even more “brilliant”.

The enormous impact of the AI ​​expansion, which, according to the latest figures from the investment bank Goldman Sachs, now accounts for a full 1.9 percent of the US gross domestic product, is also becoming a significant problem for the US central bank. Although the expansion is driving growth in the US economy - to 3.4 percent in the third quarter - it is also contributing to inflation, which has already been significantly fueled by the Iran war and has become the main concern for non-rich people. Wage developments are no longer keeping pace this year. If the central bank continues to raise interest rates to counteract this, the entire AI industry would suffer with its debt financing.

According to some economists, investing in the AI ​​industry is increasingly like dancing on a volcano. There are now analysis platforms such as “Exponential View” that make developments within AI companies transparent in dashboard format so that investors can register even the slightest stressors. Similar to geologists who register even the smallest movements in the fiery interior of the earth.

Even Anthropic talks about the huge risks of the technology and the enormous debt in its announcements before the IPO. But despite all the risks, the profits should ultimately be so astronomical that investors won't miss out on the offer.

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