10AM Hour: Anthropic Unveils IPO Filing, Early Anthropic Investors on Growth, Meta’s $95B Share Sale 10/26/26

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1:03Good Monday morning. Welcome to Squawk on the Street. I'm Sarah Eisen with Carl Quintanilla and David Faber. We are live, as always, from Post 9 of the New York Stock Exchange. We've got breaking news this morning. As Anthropic officially files to go public in one of the most hotly debated and anticipated market events of the year, could have major implications for the whole tech trade and beyond. We've got a great lineup for you to break down every angle of this S1 filing, including early Anthropic investor Byron Dieter of Vesemer Ventures, along with Anthropic investor and Wellington head of late stage investing Matt Withiler.

1:35We'll also be joined by Matt Murphy from Menlo Ventures, who led the firm's investment into Anthropic. A lot to dig into. Yeah, good day for a lot of those people, although, of course, a lot of details yet to come. And that gets us to what will be our full coverage from a team of reporters, including Leslie Picker, who's taking a look at the financing and the underwriters. Kate Rooney, of course, also the financials of the company. And we have our senior markets commentator, Mike Santelli, right here on the broader market impact. Leslie, we're going to start with you. Hi, David. Yes, big day here.

2:05The S1 currently including first half of 2026 financials, but I'm told that they do plan to update with the Q3 numbers in the coming days or weeks. Those are the numbers that were shared at an investor meeting showing revenue for the first three months or for the three months through September, totaling basically the entirety of the first half, although there were concerns, as we talked about last hour, after those numbers leaked, that growth could be slowing. When looking, though, at the first six months of the year, compute and infrastructure expenses amounting to more than half of the revenue haul of$16.3 billion.

2:39The operating loss was$693 million in the first half, and it narrowed significantly from the same period in 2025. Total net losses for the first half were 81 billion, but the vast majority of that was due to accounting marks. In today's prospectus that's been revealed, Anthropik said that its revenue model is largely derived from what they call pay for intelligence, basically their consumption-based revenue, which increased to about 83 percent of total revenue as of the end of last year. So a little stale there, but subscription-based revenue comprises the rest, and the company says they expect consumption-based revenue to continue to represent the substantial majority of total revenue for the foreseeable future.

3:21Digging through kind of the deal side of the prospectus, I'm counting about 22 underwriters here. Goldman Sachs, Morgan Stanley in that top line leading, Morgan Stanley serving as stabilization agent, and the company plans to list on the Nasdaq under the symbol ANT. This S-1 will stay public for at least 15 days per SEC rules before Anthropic can begin officially marketing the deal with terms that include a prospective price range as well as evaluation. Anthropic is likely to make its debut the week of the 16th, guys. Okay, Leslie, hang on for just a minute. Let's get to Kate Rooney for more on some of the takeaways, Kate, that you found in the filing.

3:59Hey, Sarah, well, one really interesting part of this is founder control. So Anthropic's founders are set to keep a majority of voting power after this IPO. Company plans to give a single special share to an entity that's going to be owned by its seven co-founders. So this share will carry 50.1 percent of the vote. It does allow the founders as a collective group to outvote other shareholders on key decisions. That does include electing some board members. They also say certain seats will be reserved for its long-term benefit trust in a separate process. And then the risk factors really stand out in this IPO.

4:34It's nearly 100 pages, guys, dedicated to all of the risk. Politics is one. They say the political environment and AI regulation could subject them to heightened scrutiny. They talk about political backlash as well. And then this one, guys, a headline as well, self-preserving behavior and then that existential risk that some have talked about. Models, they say, have exhibited and may in the future exhibit unexpected strategic or self-preserving behaviors. They talk about attempts to resist shutdown, conceal, or manipulate information or generate outputs that could be interpreted as coercive, deceptive, or manipulative.

5:10They talk about behavior resembling blackmail and then access to compute. Another risk here, if they don't secure enough, they say, quote, we may be unable to train our models in a way that remains competitive. Customer concentration and distribution as well. Two customers accounted for nearly a quarter of revenue for Anthropic last year. And then nearly half of sales in the first half of this year came through cloud marketplaces. Some of those cloud partners, of course, are major investors. You have Amazon, you have Google, Microsoft that also supply that computing power and then, of course, invest in the company.

5:41Debt is a risk as well. They say if we fail to raise additional capital on acceptable terms or experience other adverse developments, it could affect their liquidity. They may be unable to satisfy those obligations. Interesting, guys, They only mentioned two direct competitors, OpenAI and Alphabet in here, but they did mention open weight and open source models that may, quote, capture a portion of the market for certain use cases, which could exert pricing pressure on our offerings lead to certain customers or adopting rather open source alternatives. That has been one of the open questions, guys, is what do these cheaper models mean for anthropics margins?

6:16They are calling that out explicitly in the risk factors. Leslie, would you have expected to see a TAM in the filing? And did you did you find one? It is a great question, Carl, because remember, the TAM that was disclosed for SpaceX, which was about 30 trillion dollars at the time, really raised eyeballs and had a lot of people talking. And so I would have expected some sort of total addressable market that Anthropic would be looking to, especially since it is such a nascent technology. There are very few comps in the public markets, if any. So total addressable market, at least based on what the company says, may help anchor things or can kind of, you know, potentially do the opposite as well.

6:56So in looking through this perspective, I didn't really see one. They do say that there is a near term opportunity to transform cognitive work. They kind of say that we believe the work that knowledge workers perform represented a more than 40 trillion in economic value globally in 2025. But they didn't go as far as to say that was their specific total addressable market. They just say they're expanding. They mentioned kind of pharmaceuticals as a potential market, white space that they can get into. But no clear TAM for AI from Anthropic as far as this initial S1 disclosure shows. I wonder also, Kate, if investors are going to focus on a risk around the concentration of key customers.

7:39Top five customers represented 25 percent of revenue during the first nine months of the year. Many major clients don't have those long term contractual obligations. They have a very high retention rate, revenue retention rate. But I guess the question is, is if we don't have the total addressable market, what that actually looks like? It's a great point, Sarah. I would also mention that a lot of their investors, a lot of their customers are also beefing up their own AI offering. So at what point does a Microsoft try to woo customers away to their own products here? They clearly are relying on Ampropic in the near term.

8:12They don't give any visibility. The other thing I would call out is CapEx. We don't really have a full picture of the computing commitments into the next couple of years here and the assessment of how much capital they actually will need going forward. So that's an interesting thing. The other interesting nugget here, I mean, again, is a lot, as Leslie mentioned, hasn't been disclosed, but margins. I mean, their profitability looks a lot better from even a couple of years ago. We don't know exactly what they're adjusting for, but you see this chart of, let's see, I don't know if we have it. It basically shows the increase in margins, and at least on an adjusted basis, this company is profitable, which we've been reporting.

8:53But interesting that they're able to get there at a time when their expenses are so massive. Kate, we did. It does seem we got and I mentioned this a bit. I've got a bit more detail on some of their compute contracts. In other words, what they're what they're contracting for in terms of compute from the likes of Microsoft, SpaceX, Amazon and Google. Some of it's been reported. Others hasn't. But, you know, they're going to be paying SpaceX three point one billion a month starting, they think, as soon as December, I guess, of this year for capacity. Again, those are short term arrangements. They could go as late as 2029, but I guess they could be ended in a much shorter time frame than that as well.

9:34It speaks to the demand, David, too. You have this flywheel of they need compute to generate revenue. And there's a chart in here as well that sort of talks about that translation from computing power does sort of equal revenue for them. And this this flywheel effect of they just desperately need computing power in order to improve the models, in order to grow revenue. And so that is that dynamic is spelled out here. But it does call out the importance of compute. And they would say that for the last couple of years here, they've been compute constrained. And they have done dozens of these deals, whether it's with SpaceX or some of these debt deals.

10:09I believe TSMC is also mentioned here. You have names, of course, like NVIDIA. But it does speak to also the importance of this company. I mean, I think it's worth mentioning, too, until now, until the next couple of weeks here, There has been a private company that is so deeply tied to the rest of the market, to the AI trade, which has been supporting the market. So I think as we talk about this IPO, it's just important to remember how deeply tied this company is to the rest of some of the big cloud providers, big tech names that are going to report this week. And I think that's one of the reasons, among others, that this company, this IPO is so unique.

10:43Yeah, I mean, Carl, we need not be reminded any more than the fact that SpaceX, on the tape, raising their$40 billion through Apollo, through a special purpose vehicle, to buy the chips that conceivably they will be putting in data centers that then will be sold to Anthropic. Not sold to, but the compute power will. So right there, you've got the circularity that we talk about in terms of the dependency. And then the meta deal, of course, which we'll get to as well. The other interesting wrinkle in some of the takes I'm seeing is that it's not really a consumer chatbot business. Most of the revenues, infrastructure, software, API usage, enterprise, things like that.

11:21But we spend so much time worrying about how many downloads did chat get versus something else. It's true. Meta and chat are more in that game. Yeah, they are. And meta now with the news agent. But, I mean, Claude, I should say Anthropic, and I think one of their key differentiators was going after the enterprise market early and knowing that coding would be a key. And, obviously, they succeeded in that. And that's why they were able to pull ahead of OpenAI in terms of potential projected revenue. Of course, again, coming back to what we don't know, we really do want to see where they stand right now.

11:56Kate, Leslie, thank you guys for a great tag team work on a pretty dense read. Let's bring in Mike Santoli for more on the impact of the tech trade in the broader market. You're encouraged to have this out now? I think around the edges, yeah. And you have a market that greets this filing in need of reassurance about the durability of the AI trade. And I think initially what the aggregate market looks at Anthropica as is a customer, right? We needed to raise more money than any IPO has ever raised so that it can make good on these obligations, so that the build-out can continue at something like the pace that we've been expecting.

12:29I think, you know, again, at the margin, it probably did so. I think some of the operating metrics might be a bit of an upside surprise relative to what we thought. I even think customer concentration doesn't seem that alarming at all. Top five at 25 percent. I mean, these are massive global tech platforms. And, of course, the biggest other tech platforms are going to be a part of that. So all to the good. I mean, I think the valuation is always this crazy triangulation of some point in the future when it's going to justify it. SpaceX has held its valuation, even though it wasn't really there in the business when it came public.

13:03You know,$1.5 to$2 trillion, whatever we're going to be talking about for Anthropic. Meta's$1.6 trillion. It has a quarter of a trillion dollars in revenue this year. It does$75 billion in net income. You're not going to get anything like that. And so you have this leap of faith type effect. I think the other part of it, the market's going to struggle with, are we going to be double counting a lot of this revenue? They sell through the cloud platforms, right? largely. And so you're going to give Microsoft and Google credit, so to speak, or the valuation chips for what is ultimately underlying it as Anthropic or if it's OpenAI or something.

13:40It's very messy and they have cross ownership and investments in these things. I'm not concerned about the lack of a TAM. TAM is silly series A, you know, pitch book stuff. And if you said the TAM was all of human labor, that's a bad political look. And so they're not going to say that. And So I think that's fine. Speaking of good looks, I thought the note that they accompanied with, you know, the preface to the S1 from Dario and his sister and some of the other founders. I mean, that's what's been missing in a lot of their communication. It was talking mostly about all the benefits to humanity that AI could serve from economic growth to global economic growth.

14:16They led with biotech innovations and how Anthropic is already working on that and a number of other productivity, boosting productivity globally. They talked about the risks as well, but it was the first time I actually really heard them, you know, read them going into depth about some of the positives. Well, and it's like that's why they that's why they went into this business, presumably. And I do think it's trying to counter what has been mostly a drumbeat of the risks and the any unintended consequences, real and imagined. So, yeah, I think that's a big piece of it. Now, in terms of how the overall market absorbs this chunk, it will be fascinating because, as I said, SpaceX got done.

14:53It got done at a pretty good valuation. It has held the valuation. But June, when that happened, was the absolute peak in all of these trades. And so you had this big buildup of excitement and hype into that. It completely did clear the market. And then we've been having a hangover since then in terms of the hardware trade, certainly AI power. If you take a look at the ETFs that track those areas, they're badly underperforming health care on a one-year basis, right? There you have it. And so I think that maybe it's an interesting starting point for it. But I also wonder if there's a not going to get burned again.

15:28We don't know what the end of this capital raising is going to be, both debt and equity. Everybody's going to be competing for it. And it's a big turnabout from a couple of years ago when it was all about how much of the market's going to get bought back by companies. Right. But, yeah, I mean, I think one of the themes today, certainly, if not in recent weeks, has been access to capital is going to be a key differentiator in terms of your future success. And obviously, Anthropic, whether they raise$100 billion or whatever the number may be, although you're not expected to see many follow-on offerings from a company that went public.

15:59But that said, SpaceX has hit the debt markets a number of times since it became a public company. And Elon Musk is happy to point out that it's investment grade. Without a doubt. And there is something to be said for once you have that market cap, even though it is not securing the debt, the market cap is something that creditors look at and bond investors will look at. and say, OK, they can handle more than we thought before. So you need the public market cap in a way if you want to be also somebody who's issuing debt. Yeah. Again, because the capital raising seemingly will not end anytime soon.

16:33All right, Mike, thank you. Joining us now is Bessemer Venture Partners, early anthropic investor and partner, of course, of Bessemer, Byron Dieter. Welcome. It's good to have you. What do you hope investors are taking from this? Well, let me say great to be back with you on this exciting Monday morning. It feels sort of like Christmas as everyone's unwrapping this gift of the Anthropic S1. But at a high level, I think that everyone's diving into this to understand the same mega trends that people have been looking for around adoption characteristics. Are open weights impacting growth rates? You're looking at margin characteristics.

17:05Are you starting to see leverage in these models? And ultimately, renewal rates are starting to show themselves. What is happening with customer buying behavior? Are they liking it? Are they buying more? Are they coming back? And those are the types of things, as investors, people are going to be tearing through not only this S1, but upcoming ones. I mean, one of those issues that you mentioned has been fresh in the market's mind, which is the competition versus open weight models. I mean, it's hard to really see that, right, at this point? So I think the exciting thing by numbers from them and others is that we're seeing this heterogeneous world reveal itself.

17:40There's going to be this great coexistence and this idea that the leading companies are no longer going to want frontier compute capabilities is sort of ludicrous. They're going to want to be on the edge. They're going to want to be pushing product for their customers and they're going to want the best tools and technology and products to do that. With that said, there will be a role for open source. There will be a role for open weights models. There will be a role for degraded prior generation models at more efficient costs. And that's this combination that makes the model work for different business needs, even within the same company, nonetheless, across the whole spectrum of companies.

18:14I mean, the growth rates are incredible, Byron, as we've been talking about. The 1 ,000 percent revenue increase in 2025 and then quarter to quarter, I guess the third quarter, we're looking at a 45 percent. One question is, first of all, when did you get in and has the growth, the really astronomical growth and money been made? So I need to give my usual disclaimer. We were fortunate to invest early in what was the$14 billion pre-money round Series D many years back. And so I can't comment on specifics. That's why it's Christmas for you. We were fortunate to partner early and aggressively. This is now the largest investment in Bessemer Venture Partners' 116-year history.

18:54By cost basis, nonetheless value. So we're quite fortunate to be close partners and think the world of the team. You know, I am curious to follow up, though, on Sarah's question, Byron, because there has been a lot of focus. on whether their revenue growth rate is decelerating and how quickly? And are they now once again sort of losing share, so to speak, to open AI? Do you have any sense for where things stand at the company? So I'll take the higher level answer here, which is to say we have never in the history of technology nor the history of business seen growth rates like we're seeing in the AI markets.

19:30And so we need to keep that in perspective for businesses that are growing a thousand percent a year historically that are projecting to grow at astronomical rates. We need to keep the absolute perspective. And right now, everyone's been waiting for this S1 because they're the leader. Financially, market share, all of those elements, as well as product-wise. And so, again, I can't comment on these specific financials, but to say there's a reason why everyone's been focused on this in the clear leadership position in each of those dimensions. Yeah, of course, it will go to what the ultimate valuation of the company is.

20:03It's not a question as to whether it's been one of the most successful companies we've ever seen over a short period of time. I'm curious. I don't know. Do you have an opinion? I mean, I am sure you'd love it to go out at as high a valuation as possible. Or would you if you want to continue to be a large shareholder? A trillion and a half? Could it be as much as two trillion, Byron? I think for all investors looking at these things, we're looking at the medium and long term, which is what can be with steady delivery. We've had a choppy market, especially when you look at the compute capacity and those elements, people trying to project demand.

20:35And so we absolutely are excited for what could be the largest IPO in history. And as the world looks forward to what can become over the coming quarters, execution can result in some great outcomes here for all investors, old and new. What about the governance? You know, the single F share held through this LLC controlled by the seven founders looks like carries 50.1 percent of general shareholder voting power. And then you also have this long term benefit trust, which appoints the majority of the authorized board seat. So public investors don't have a big have a big vote here. So I think with many of our IPOs, this one included, when you have great leadership, you often see investors comfortable with giving early management and founders governance into the public market world.

21:21And that is it's not a given. There's some unusual elements to these things when they occur. But for category defining industry transforming opportunities, you want teams to be able to think long term. And there are a lot of benefits to being able to do that so the teams can focus on true innovation and not be month to month or even quarter to quarter. Going into the filing this morning, Byron, ordinarily we probably would have talked about Musk's comments over the weekend about the hundreds of neoclouds in this case who don't have revenue that's not tied to data center. How do you think about the vulnerabilities right now?

21:59Carl, I think the term was guppy death, that these neoclouds were going to consolidate guppy death. And, of course, it's self-serving for Elon. He's great at these things. But in this case, I agree with a lot of the intent, which is you're going to see consolidation and the leaders are going to separate. Clearly, Anthropic is one of the leaders. They will benefit from some of these destabilizing events. There's a yellow flag going on in the debt markets right now for neocloud capital as cost of capital goes up. But I think there's two things. It's not just compute capacity to focus on. And we are at this interesting time where gigawatts equal tokens, equal dollars in a very transparent and unique way, but also compute efficiency.

22:38And that's what people are more and more focusing on is what are the architectures underneath these companies? What's the leverage they're getting on their GPUs and TPUs and different compute stacks? And I think that's where companies will differentiate ahead. And that's where the compounding effects of great leadership and great architecture will start to show. All right, Byron, thank you for joining us fresh off this filing. And we'll talk to you as we get closer to the IPO, for sure. Byron Dieter from Bessemer. Thank you. We'll get more coverage coming up on Anthropic throughout the morning, including investors Matt Witheiler from Wellington and Matt Murphy from Menlo Ventures, plus the Brazilian markets tanking on the back of the surprise presidential election results.

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24:34This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. As we got this anthropic IPO, the other big story is the, of course, carnage in Brazilian markets and the major upset for investors that happened over the weekend in the Brazilian runoff election.

25:18And that is Lula won his fourth term. This is, of course, after the preliminary first round results showed that it was going to be a Bolsonaro victory. That is the son of the former president, Bolsonaro. And guess what? The markets are reacting extremely negatively to this victory. sell-off across Brazilian stocks, bonds, and the currency. This was almost 50, he won almost 52 % of the vote. There's the ETF that tracks Brazilian stocks, that trades here down 24%. If you look at Brazil's own market, the Bovespa, it triggered, actually it had to, it triggered stop, it stops, and circuit breakers because it was down so much.

25:56Why? What's the problem? Well, first of all, the market was completely surprised by this. The prediction markets had it wrong. The polls had it wrong. And of course, the first round had it wrong. And so the market was pricing in a more business friendly, conservative fiscal leadership. And what they got was more of the status quo. Lula, who, you know, Brazil has a little more than 83 percent public debt to GDP. So it's not the same kind of numbers as in the developed world, but Lula campaigned on more public spending. And so now the concern is credibility around fiscal policies. It's very familiar to what we're dealing with in developed world.

26:34The market was looking forward to maybe seeing a little bit more responsibility. Instead, more privatization, for instance, with Bolsonaro, more business-friendly policies like we have, for instance, in Argentina with Malay. It got the opposite, and the market is reflecting that disappointment today, guys. There's all the added wrinkle that Bolsonaro wants to have these results annulled. So you might be in for some round of political turmoil overall. Yeah, that's never ideal when you have that uncertainty out there for investors, of course. But look, Brazil has a big impact on the global economy, just to remind you of how big of a commodity exporter it is and a powerhouse.

27:11Number one exporter of soybeans has 60 percent of the global market. Number one producer of coffee, exporter of beef, number one. Number two exporter of iron ore. I think the critical minerals are going to be an important one because it does have access to critical minerals and has been in talks with the U.S. about that. And then, you know, there's trade relationships here that are really important. And so the Trump-Lula, I think, trade discussions are investors aren't as hopeful about that one as they would be against his competitor. It's a lot of soybeans to China. I know that. Yeah, to China and around the world.

27:47And they play this, you know, they do this delicate dance where they sell a lot to China and to the United States and keep relationships with both. And what's the old Sinatra tune? There's an awful lot of coffee in Brazil. Do you know that one? Yes, I do. Pretty amazing. I can't see it as well. Yeah, it is amazing to see what's happened to the march to the right in Latin America. Let's get a... Not up on my Sinatra. Let's get a CBC News update with Dom Chu. Hey, Dom. All right. Good morning, Carl. 175 House Democrats signed a letter condemning a federal raid on the home of Minnesota Representative Ilhan Omar earlier this month.

28:20The letter said the lawmakers were alarmed by the, quote, weaponization of federal law enforcement against her. Federal authorities are investigating possible fraud in her family's immigration paperwork. Tallahassee police say a 15 year old boy has been charged in a weekend shooting that injured 11 people at Florida A &M University over the weekend. Investigators say a fight broke out after the school's homecoming football game on Saturday night. They say none of the victims appear to be the intended targets of the shooting. The teenage suspect is charged with attempted second-degree murder. And Grammy Award-winning singer Chris Brown was spared prison time today over an assault at a London nightclub.

29:01Brown faced up to three years in prison after he was found guilty this summer of beating a music producer with a tequila bottle three years ago. A British judge sentenced him to eight months suspended, which means he won't have to serve time unless he commits another offense. Carl, I'll send things back over to you guys. All right, Tom. Thanks very much, Tom. A lot more coming up on the market reaction to this Anthropic S1, what we know about the timeline for the IPO. We'll talk to investor Matt Murphy from Menlo in just a minute. And there's Meta at the same time announcing plans to raise close to$100 billion to fund their AI buildout.

29:36We'll look at the new share structure being created and the impact for current investors with shares just down a percent.

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30:42Check response, subscription required. This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Schwab Market Update, an original podcast from Charles Schwab, provides an information-packed daily market preview on stock updates, U.S. and global economic news, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash marketupdatepodcast or find Schwab Market Update wherever you get your podcasts. Welcome back. We've been reporting for weeks, if not months, on the expectation from many investors in Meta that the company would undertake a significant offering of equity in order to continue to fund all of those CapEx needs that we spend so much time talking about as well.

31:30But when we got earnings last week from Meta and we also learned of this new establishment of a class of non-voting shares called the C-shares that would not actually happen until early next year. The expectation became, well, perhaps they're going to wait until they can issue that equity with the C-shares. Not the case. Yes, they will be issuing a lot of equity with the C-shares next year, but they also are taking advantage of timing now and hitting the market with with over 35, roughly$35 billion worth of equity. $22.5 billion of common, and then a mandatory convertible preferred of$12.5 billion as well.

32:15So, you know, in speaking to people around this, meeting all weekend with their advisors, as you might expect, trying to understand whether they should wait or not, and obviously deciding, and as we've been talking about all morning, this idea of access to capital being a differentiator, Well, you've got it. Take advantage of it. Do it now. Do it before the midterms and any other risks that may come between now and early next year. Now, speaking of early next year, there is an expectation as the year moves forward that they are going to do$60 billion of issuance of these C shares at the market.

32:52So it's not going to happen in any one day. In fact, it could be dribbled out over a period of time as well at the company's choosing. But again, it is an enormous issuance of stock from this company, raising of capital for the same story that we've been talking about endlessly and will continue to. So when you look at the$40 billion, which we finally got a press release on involving SpaceX today on the debt side and Apollo actually is its lessor. And we look at Anthropic and what the expectation is there of perhaps as much as$100 billion raise, the largest IPO of all time. and now Meta potentially 95 billion, let's call it, over time.

33:33The numbers are extraordinary. The numbers are extraordinary, and it's this new era of the AI trade, which is the competition for capital. First they were competing for chips and compute. Then they were competing for electricity for the data centers, and now it's this rush and competition for capital while it's available, which is staggering, especially for Meta, which is one of the most profitable technology companies in itself to have negative free cash flow and have to raise more. Exactly. And, you know, it does go back to that early May news, which really did shock the market when Alphabet, again, to your point, one of the most profitable companies the world has ever seen, said, oh, no, we're going to need to raise$80 billion in equity.

34:15And they wanted to do it before anybody else. And they succeeded in doing that. You know, since then, other companies have also done so. Oracle did$20 billion at the market. They may need more. Meta now. And we'll see what else. And it just feeds the question, Carl, right? Is it all worth it, right? Is all the revenue generated going to be worth all the spending? And I think it also feeds the circular funding questions as well. It does. And by the way, on that note, NVIDIA, and again, for$5 billion of this offering, NVIDIA, Broadcom, and AMD are stepping up for$5 billion of the Meta offering. Right.

34:47I'm trying to think when the sterling deal was for Alphabet. But shares are down. It was$400 in the spring, now closer to$300. but they clearly outgrew the domestic bond market for corporate debt. They did. They went overseas. At least for the year, because you want to sort of do it annually, not stuff too much. And then we have the ongoing competition with sovereign debt and U.S. debt, and Besson has certainly talked about the competition for capital there and what some of these hyperscalers should do in the belly of the curve. Yeah, he's saying they should issue more in the belly of the curve.

35:18If we're going to see near-term benefits on productivity, why are they doing long-term debt? And that does potentially compete with the Treasury, which has to issue a lot of long-term debt to pay for our debt and deficits. I mean, investors are being asked to finance all of this. And I guess the bull case on Meta is that, you know, we saw, what, 26 % revenue growth last quarter. The AI enhancements are helping drive. Helping drive it. And obviously nobody questions the ability of the company to pay back any of their debt on the debt side. And or, you know, I mean, look, look at the stock today.

35:50It's barely down on news that otherwise you could have imagined perhaps in a market that was not expecting it might have reacted negatively. Sticking with Mag7, Alphabet and Amazon, Microsoft earnings out this week. The options market has some clues about how the stocks might trade on those results. And for that, we'll turn to Oliver Rennick at SIBO. Morning, Oliver. Hey, Carl. Lots of opportunities for the AI trade to get back on track this week with Alphabet, Amazon and Microsoft reporting. Market makers are pricing the biggest move for Amazon, a 7.3 % implied swing, which is about on par for Amazon's very choppy past year.

36:28About$40 million in options premium traded so far this morning, and more than twice as much looked like it was tied to call buying versus put buying. There was also a lot of action in the zero-day options between the 250 and 255 strike calls. The biggest single trade among the three stocks this morning is an alphabet where someone bought almost$5 million of at-the-money 320 strike puts expiring mid-December. It looked like that was a closing trade, which means perhaps that person thinks alphabet has room to slip from here. And it does look like more money was spent in alphabet buying downside than upside.

37:05Perhaps reflecting its lagging nature this year, it's up just 1.5%. Now, overall, the most positive flows show up in Microsoft. Over 70 ,000 contracts have traded so far. 45 ,000 of them were calls, including a new buyer of 557.5 strike calls expiring November 6th. Those need a 7 % rally to work, guys. Always interesting to track the big bets and how that jives with sentiment around these stocks. Thank you, Oliver. After the break, the man who led Menlo Ventures' investment into Anthropic, investor Matt Murphy, joins us with his first take on the IPO filing. Next. Welcome back here at Three Big Movers.

37:46We're watching. First up, Tesla at the top of the Nasdaq 100 this morning after Barclays upgrades the stock to buy from hold and raises its price target by$80 to$370 a share, citing in part a potential merger with SpaceX and strength in the core business. Raw Stores is also moving higher, also an upgrade there. UBS raising its rating to buy from neutral, saying it sees comp store sales growth momentum in 2027 and beyond. And then check out Verizon out with earnings this morning, beating on earnings per share, missing on revenue. Management discussing the SpaceX cellular network news, saying, quote, they welcome the opportunity to compete against them.

38:23Although investors in Verizon might disagree with that statement. Yeah, I mean, Dan Schulman went on to actually on the call to add some real numbers about what he thinks. It's going to take a minimum of four to six years to fully build out, at least what he says is going to be a real competitor in terms of their backhaul needs, their combination of fiber, maybe some satellite. And he says it could cost them hundreds and hundreds of billions of dollars, somewhere between$300 billion and half a trillion over the next seven to eight years. Of course, when I hear those numbers, Carl, I think, well, maybe they should just buy Verizon, SpaceX.

38:59It's costing, I mean, it's nothing as a percent of their overall market cap. Verizon. Anything else on your shopping list? I mean, I'm not sure it would be allowed, but then again, who knows? It probably would. Yeah, sure. They could just buy all of them. Why not buy AT &T and Timo also? That one might not get through antitrust regulators, even for Elon Musk. He did make it clear, by the way, Shulman, that they will not offer these so-called MVNO to any satellite providers, including SpaceX. There had been some discussion or at least some thought. I think you've even mentioned it, that maybe they hadn't been heard from yet in terms of saying no.

39:31These are the capacity agreements that a lot of the likes of Comcast to offer wireless service and charter under the Spectrum brand. They're not going to give SpaceX that opportunity. You're right, though. It's a lot of leases, power. We've been through the tower and Spectrum stuff, but they're chipping away at it. They are. And, you know, and again, you know, it's SpaceX and it is Musk. And so do they have a different approach? It goes back to first principles. I don't know. But there is certainly amongst those who are supportive of him, there is a belief that he will do it differently and figure out a way to do it for a lot less.

40:04When we come back this morning, early Anthropic investor Matt Murphy leading Menlo Ventures investment in the firm. That's when we come right back. Neocloud names on the move today, although CoreWeave is now flipped positive. Elon Musk over the weekend warning about the group, posting on X yesterday afternoon that debt markets, in his words, have almost entirely shut off access to money for any company that does not have substantial revenue independent of AI data centers. He adds, quote, that means the 200 plus neoclouds are going to see guppy level death and consolidation. Some will make it through, but not many.

40:39It is interesting. In a lot of these cases, guys, he's responding to Chamath or somebody else. Last week, he just replied, yikes, when looking at some of the core weave debt action. But he's gotten more expansive in his rhetoric. I mean, and he's highlighting the concerns that investors have already. And I think he's, you know, putting an exclamation point on them. And that just sort of reinforces what investors have been afraid of. There's nothing new here in terms of the concerns. Investors have been worried about the financing ability for some of these neoclouds and whether they would make it.

41:09He's just saying it in very succinct, harsh terms, which I think that. And it's self-serving as well, of course. I mean, by the way, it doesn't mean it's not true, but it certainly helps him as SpaceX quickly and rapidly becomes one of the major providers of compute out there. We need to look no further than Anthropics. That's one that we got this morning to see how much they're going to be paying them. $3.1 billion a month starting in December, conceivably, having agreed to spend an aggregate of up to$120.5 billion over terms that extended to 2029 with SpaceX. Those are shorter-term deals, but if, in fact, they keep getting extended, that would be the number.

41:49The other thing he said was he wouldn't be buying neoclouts, said that'd be pointless, in his words. And then this notion that we would end up with a lot of stranded compute in partially complete data centers. This, of course, is the analog to the dark fiber period of the dot-com bust. It is, and I can hear so many people in my mind saying, yeah, what about H100s right now that go for more money now per hour of use than they did five years ago? And so the question would be, if they're stranded to compute, it doesn't necessarily mean that it's not of great value and won't immediately be sucked up by somebody else.

42:26It's the likes of when I had a conversation a year ago, I guess it is, with Clay McGurk, who runs Oracle, co-CEO of Oracle, when the questions, which are still valid, about open AI, if they're not there, will you be able to repurpose? Exactly. And of course, his answer was yes. Let's get more on Anthropix S1, of course, the subject of conversation here for the last almost two hours. Bring in Matt Murphy. He's an early investor in the company, a partner at Menlo Ventures. Matt, it's good to have you. And of course, man, when you get in it, I think you got in, what, a$4 billion valuation pre any revenue there.

43:03Give me your thoughts on the S1. Was there anything in there? You know, I'm just curious as to whether and obviously it's a very long document, but whether anything has caught your eye thus far that perhaps was unexpected or is of interest. I mean, I'm just glad that the information is finally out there. You know, there's still been so much speculation on all the numbers, and everyone can read and digest it for themselves. I think one of the most impressive things for sure is if you just look at public market software companies, they're growing 10 % to 15%. The top 10 % might be growing 30%. And then you look in this S1, and here's a company at scale larger than most of them that year over year grew over 10x.

43:43So it's an exceptional story. It's not the kind of growth nor scale you see in the 25 years I've been in the venture business. So it's great to have the information out there and let everyone digest it on their own. Yeah, got a bit more about margins. We got a bit about revenues increasing at a faster rate, for example, than what they pay for compute. That said, we didn't get any updated numbers when it comes to where we stand on the quarter, which has been a concern of any number of people who may have invested a lot more recently than you did in terms of this idea that their revenue growth rate is decelerating and it will mean that they're not going to get a$2 trillion valuation in the public markets.

44:22You want to weigh in here? Well, they're in their quiet period. I'm an investor, so I can't say too much. But I think the market prices, you know, efficiently. So people are going to digest this and determine what they believe. I mean, again, going back to the baseline, where else does the market go for growth? Like, if you want to buy growth right now, where do you go? certainly growth at this scale. And then if you want to participate in the, quote, AI trade or SI trade, where do you go? There's a very limited set of places. This company is one of two companies that really kicked off this whole wave.

44:55It's kind of the heart and soul of the entire industry. So if you want to invest in the space, Anthropic is the place to invest. How do you process the safety risk? I mean, This is a company that does actually say in the risk that some of the risks are existential, and then they go through some of the cyber risks as well. And what could happen if AI gets out of control? How do you price that as an investor? Yeah, well, first of all, we're early stage investors. So, you know, I'm not public market investors, and I don't spend a lot of time on S1s. I do think that S1s, you know, you have to apprehensively and exhaustively lay out all different kinds of risk factors.

45:36And I think that people can digest those. And then you have to balance that with, you know, this whole industry that they've helped create. And so there's risks. And at the same time, there's tremendous opportunity and new things that it's creating for society that probably are getting less attention right now, given people want to focus on the risks. But risks are real. Yeah, I mean, so my question is then, are you not as interested in this company as a public company, which, I don't know, may be forced to delay one of its model releases because of safety concerns? And then, you know, there are issues when it comes to competition with OpenAI and others.

46:12Well, look, this is the company that's had the commitment to trust and safety from the get-go. When I first met Dario back in 2023, that's what he brought up. That was one of the distinguishing aspects of what would make the company different. And I think that's played out. You've seen that in the enterprise market where they have majority or leadership in terms of market share, that that's really come through. I think the thing to focus on here is like this is a great American story. They started off as the underdog. No one had even heard of them before. ChatGPT was a household name. And through better product, better execution, commitment to trust and safety, they've become the leader.

46:51It's it's fantastic. That's what America is all about. We did get one clue about the current quarter when they said that 80 percent of revenue came from models that had been created in the prior six months. And I wonder what you think that says about the lifespan of models and the cost of renewing them with such frequency. Yeah, I mean, that's part of what goes hand in hand with the growth we've seen in this market is that product velocity is also something we've never seen before. In the old world of software, you'd launch something maybe once a year. This market is so competitive, it's keeping everyone on their toes.

47:28And if you don't come out with a better model as frequently as you're suggesting, you might fall behind. So I think that that's good for innovation. That's good for the industry. And it just keeps the more intelligence is shown to have a significant impact on the performance of applications like Lovable and Lagora that are users of the product. and the better the models are, the better those companies are and the happier their customers are and buy more. So these things are all kind of interconnected in a really cool way. Yeah. Matt, I mean, whether it's a trillion and a half or two trillion, I would assume for you, I mean, getting it at four billion in terms of the value.

48:06Is it the will it be the single best investment you've ever made at your firm? And I'm curious as well as to what it was that you saw with Dario, given it was a pre-revenue company that encouraged you to invest at that time. Yeah, sure. So, yes, it's been the biggest investment in dollars the firm has ever made. It'll be by far the biggest return. You know, you wait your entire 25-year career to find a technology wave like this. And to be able to have invested in the leader early is just phenomenal, fantastic. and to watch their growth and evolution. You know, you asked about Dario. You know, like the beauty of venture is like you love to see these origin stories of founders where there's something that's driving them to build a company, not just that they decided they wanted to build a company.

48:54But Dario, as you probably know, was the head of research at OpenAI running ChatGPT. He said, this is the thing. OpenAI was doing 20 different things. He said, this is the one. They're not focused enough on it. I see what this can do for the world, how important this is. I'm going to leave and start the company. That's the kind of grit that we love in entrepreneurs, that they walk away from a safe and great situation like that. They take the risk. It can be a zero, and yet they plunge into that because they have the burning desire that this is the thing that they want to launch into the world and make a difference.

49:27And the road was hard. They had to do much more with less and just a fantastic team that has always been aligned and executed tremendously. I would assume once this thing is public and once you can sell, you will do so, correct? We haven't made any distribution decisions yet, and I probably shouldn't comment on that. But you just read the S1, and there's a lot to be optimistic about in this company. What do you think is the key metric? Is it revenue growth? Is it free cash flow? Is it the improved profitability? Where would you steer investors? Yeah, I would say certainly growth, because we already talked about, like, you know, where else can you buy or participate in growth like this in the public market?

50:10You can't. A lot of investors don't have access to the private markets, but even the private markets, you can't find, you know, at this kind of scale. Certainly gross margin, you know, free cash flow sometimes bounces around for any company, depending upon where they are in the investment cycle. I think there's some information in there on, you know, kind of compute efficiency, like how much money they're spending on compute relative to their revenue. And I think you see that trend really going in the right direction, meaning they're getting more revenue per dollar of compute. And I think that's something that's important.

50:47And then, you know, we all kind of have to just look forward and say, where are we in the chapter of AISI? Are we like in the first inning, second inning? We're certainly not in the ninth inning. So as you look forward and say we're early in this, this is already happening. Where else can I invest in this biggest technology wave of a lifetime? And what's going to happen in the subsequent chapters? And how do I think Anthropic plays in that? And everyone should assess that. But I think the signs are pretty darn good. All right. Matt, always appreciate it. I have a feeling we want to pre-book you for IPO day as well.

51:23I might even come in live. There you go. We'll get you right here. Thanks again. All right. Good to see you.

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