In 1999, a hot new tech company called VA Linux went public.
On its first day of trading, the stock exploded by 698%. Early investors felt like geniuses. They were holding shares in the future of open-source software, a market everyone agreed was going to change the world.
And open-source software did change the world. But within a year, VA Linux stock had crashed by more than 90%. The company had a great product and a massive market, but it lacked one critical thing: a valuation that made any darn sense.
IPO investors hadn’t just paid for growth; they’d paid for 100 years of perfection.
Why am I telling you this story? Because the same thing could be about to happen again. Don’t let it happen to you.
The Roadshow Numbers
Yesterday, Tuesday, November 10, 2026, we witnessed an historic milestone in the AI boom: the launch of the Anthropic IPO roadshow.
Anthropic, the creator of the Claude AI model, is considered one of the crown jewels of the AI revolution. But as we prepare for shares to start trading under the ticker ANT later this month, we have to ask ourselves a tough question:
When does investing in the next great company turn into paying too much for it?
According to its newly updated SEC filings, the company set a preliminary price range of $70 to $78 per share. That prices the company at about $1.4 trillion.
But that eye-watering number is a step back from what the bankers were floating just a few months ago. Over the summer, expectations were closer to $2 trillion.
The recent market volatility following the midterm elections, and a sudden cooling on tech stocks, forced the underwriters to moderate their ambitions. Yet, even at a "discounted" $1.4 trillion, the expectations baked into this price are nuts.
If you buy a stock when its valuation assumes it will conquer the universe, you lose your upside. In fact, what looked like upside can quickly turn to downside.
The Trillion-Dollar Infrastructure Bill
To analyze if Anthropic can justify a trillion-dollar-plus premium, let’s look at the economic reality of building frontier AI models.
Unlike traditional software companies — which have 80% profit margins, because copying code costs close to nothing — AI companies have massive overhead.
Anthropic’s prospectus reveals nearly one trillion dollars in committed compute and infrastructure spending. It’s locked in an arms race with OpenAI, Google, and Meta — meaning it needs to spend massive sums on specialized microchips and electricity just to keep Claude competitive.
Now, if you’re only looking at its growth numbers — they’re undeniably spectacular. Its annualized revenue run rate hit $81 billion at the end of October. But because of its infrastructure bills, it posted a $104 billion loss over the first nine months of the year.
When you buy into an IPO at an extreme premium, you aren't just betting the company will grow its top-line sales. You’re betting it can find a way to turn massive sales into sustainable, predictable profits — despite a near-trillion-dollar infrastructure bill.
How to Spot Valuation Danger
So, how do you know when a great company becomes an investment trap?
One way is to look at the revenue multiple (the “price-to-sales” multiple) you’re being asked to pay.
At an $81 billion revenue run rate, a $1.4 trillion valuation equates to a price-to-sales multiple north of 16x or 17x.
Historically, when hyper-growth tech companies trade at multiples like that right out of the gate, the long-term returns (or losses) for public investors are grim — like the VA Linux example I mentioned above.
The Takeaway
Don't get me wrong:
Anthropic is a phenomenal enterprise. It’s shaping the future of human capability, and to me, anyway, its technology still seems like a miracle.
But as investors, we need to separate excitement from discipline with our capital.
This is especially important with Anthropic, because in a twist, it’s allocating an unusually high 15% to 20% of its IPO shares for retail investors like you.
In other words, Wall Street is rolling out the red carpet for everyday folks like you to participate on day one.
But if the Anthropic IPO ends up debuting at a valuation that leaves no margin for error, the smartest move might be the hardest one: patience.
Let the hype settle down, let the lockup periods shake out — and wait for a price that offers you some upside.
Happy investing!
