Anthropic Bets Up to 1,000 Trillion Won on AI Infrastructure as Concerns Mount Ahead of IPO - The Asia Business Daily
Existing Contracts Alone Exceed $600 Billion
Spending on Infrastructure Reached $9 Billion in the First Half, Four Times More Than a Year Earlier
Despite Revenue Growing 15-Fold, Recovering Investment Costs Remains a Key Challenge
Anthropic, a U.S. artificial intelligence (AI) company preparing to go public through an initial public offering (IPO), could have to pay up to $750 billion under contracts to secure the computing infrastructure it needs in the coming years. The company reported a net loss in the first half of this year, raising concerns about whether it can afford these enormous infrastructure costs.
According to a report published by The Wall Street Journal (WSJ) on October 20, local time, a draft of Anthropic's IPO registration document, known as Form S-1, shows that the company has $450 billion in cloud computing contracts that it must pay for over the next 7 to 10 years. The WSJ reported that many of these contracts cannot be ended early, and Anthropic must pay for them even if it does not use all the services.
More specifically, Anthropic must pay $111 billion to Google Cloud, $110 billion to Amazon Web Services (AWS), and $31 billion to Microsoft (MS), among other companies. It also has a $160 billion contract to lease Google's AI chips through Broadcom, along with other cloud computing contracts. Together, its infrastructure contracts are worth more than $600 billion.
Anthropic is also negotiating additional infrastructure contracts worth up to $150 billion. If these deals are completed, its total commitments to infrastructure spending could reach $750 billion, the WSJ reported. These agreements would give cloud providers such as Google, Amazon, and Microsoft a way to earn steady revenue over the next several years.
Anthropic is also spending money on infrastructure at a rapidly growing rate. It spent $9 billion on AI infrastructure in the first half of this year, four times the $2.3 billion it spent during the same period last year. This amount was also greater than the $7.3 billion it spent during all of last year.
This has raised questions about whether Anthropic can afford such large, long-term infrastructure contracts. The Financial Times (FT) said the company's financial pressure could grow if its revenue stops growing as quickly in the coming years.
Huge Spending Has Not Yet Secured Enough AI Computing Capacity
Even after making these enormous investments, Anthropic still does not have enough computing power for its AI needs. In its draft IPO registration document, the company said it had asked cloud providers such as AWS, Google, and Microsoft for more computing capacity than they were willing to provide. The document said one reason for this shortage was that major technology companies were growing their own AI businesses and saw Anthropic as a competitor.
Because of this, Anthropic is signing long-term lease agreements to secure its own data centers. It is also paying specialized companies to run these facilities, the WSJ reported.
The registration document also showed that Anthropic depends on a small number of customers for much of its revenue. About 20% of its revenue in the first half of this year came from just two customers. Anthropic said in the document that it expects large customers to continue providing a substantial share of its revenue for the time being.
First-Half Revenue Rises 14.8-Fold From a Year Earlier... Most of the Net Loss Comes From Accounting Changes
Anthropic's results for the first half of this year show very fast revenue growth. Its revenue reached $16.3 billion, up 14.8 times from $1.1 billion in the same period last year. In just six months, the company earned 3.5 times as much revenue as it earned during the whole of last year, when revenue totaled $4.6 billion.
However, its net loss also grew sharply. It reached $80.7 billion in the first half of this year, six times the $13 billion loss reported for the first half of last year. The latest figure is about twice the company's net loss of $42 billion for all of last year.
The WSJ reported that $72 billion of this net loss came from accounting changes in the value of financial instruments, including convertible bonds that Anthropic issued to raise money. These losses on paper are different from losses caused by actual cash payments. They made up 89% of the company's total net loss.
Anthropic is preparing for an IPO that could value the company at up to $2 trillion. As concerns grow about the huge spending and debt burdens of AI companies, the release of Anthropic's financial details is expected to draw attention to whether its planned IPO will succeed.