[Into the AI World] AI Uncertainty Persists Despite Rising Revenue... Two Giants Poised for IPO Face Profitability Test - The Asia Business Daily

Doubts are growing over the growth of OpenAI and Anthropic, two leading companies in the artificial intelligence (AI) industry. Anthropic's revenue growth has slowed, lowering expectations for its valuation, while OpenAI has faced confusion over how its revenue is calculated. As questions arise about AI companies' ability to generate profits, concerns are also spreading about whether they can recoup their massive infrastructure investments.

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According to The Information, a U.S. technology news outlet, on October 16 (local time), some investors have suggested lowering Anthropic's potential initial public offering (IPO) valuation from the previously discussed figure of about $2 trillion (about 2,686 trillion won) to $1.5 trillion (2,014.5 trillion won) or less. The slowdown in growth shown in its recently disclosed results is believed to have influenced the view.

At an investor briefing held in San Francisco on October 14, Anthropic disclosed that its revenue for the third quarter of this year was $16.8 billion (about 22.6 trillion won). That was an increase of about 45% from the previous quarter, but growth had slowed compared with the second quarter, when revenue rose by more than 140% from the preceding quarter.

There has also been confusion over the size of OpenAI's revenue. As of the end of September, OpenAI's annualized revenue was about $50 billion (about 67 trillion won), up about 134% from the end of last year. This was lower than the previously reported figure of about $70 billion (about 94 trillion won), prompting criticism that the discrepancy has made it difficult to assess the company's actual growth.

Concerns about whether investments can be recouped as AI companies' growth falls short of industry expectations have also surfaced in financial markets. This comes amid analyses that companies' actual AI spending is below market expectations and that server makers' strong revenue growth reflects their passing higher memory prices on to customers, rather than expanding demand for AI. On October 15 (local time), Nvidia fell 1.84% on the U.S. stock market, while Dell Technologies dropped 6.8% and Hewlett Packard Enterprise (HPE) fell 7.1%, extending their declines.

Selling pressure is also mounting on long-term data center bonds amid concerns about recouping AI infrastructure investments. Bonds issued to finance construction of Meta's AI data center, Hyperion, traded above face value through early July but fell to around 91% on October 15.

AI companies need to sustain their growth by expanding in the enterprise market and improving model performance. OpenAI is targeting the enterprise market with Dots, an agent that connects companies' work apps and data, enabling AI to independently handle complex tasks such as scheduling and data analysis. Anthropic is also accelerating development by capitalizing on rising enterprise demand for AI and reusing its own AI model, Claude, for AI training and error correction.

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The market is focused on whether AI demand can generate enough profit to recoup massive infrastructure investments. Market research firm Gartner forecast that, if the current pace of investment continues, more than $3.5 trillion (about 4,700 trillion won) in AI infrastructure investments could be at risk of impairment by 2030. The warning is that revenue from AI services will still fall short of covering planned infrastructure investments and financing costs.

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Meanwhile, some analysts say Anthropic's slowdown should not be interpreted as a contraction across the entire AI market. D.A. Davidson analysts Gil Luria and Turner D'Innsinger said, "This earnings report presented a somewhat mixed picture, contrary to the market's negative reaction." They said Anthropic's slower growth reflects increased competition from OpenAI and the wider use of open-weight models. As companies choose among multiple models based on the complexity and cost of their work, spending could be spread across them.

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