Among the handful of Wall Street strategists who saw Thursday's selloff coming, one is warning that an Anthropic IPO could prove a more decisive event than the midterm elections.
HSBC's Max Kettner downgraded US equities from his highest overweight rating to neutral two weeks ago. At the time, he argued that regardless of companies' capital spending strategies, the market narrative around tech stocks had already turned unfavorable.
Despite this week's brutal selling, Kettner believes the fundamentals behind the artificial intelligence (AI) thematic trade remain intact. Still, he remains cautious after the elections conclude.
In Kettner's view, given that investors had done almost no hedging ahead of the vote, how much risk this election can actually clear out remains an open question.
"The real risk-clearing event could be the Anthropic IPO in two weeks, provided it actually lists. The ideal scenario might be that it lists, but at a valuation of only $1 trillion, rather than $1.5 trillion," he said.
Anthropic's planned IPO faces various obstacles. The recent selloff in AI-related stocks has made the market environment harsher, while a shift in power in Washington could also change market expectations about Anthropic's ability to navigate the political landscape.
Kettner said: "If it lists at a reasonably lower valuation, the stock could actually start rising in the secondary market. Or at least it wouldn't plunge 20%-30% in the first week, because that would obviously be very bad."
In recent years, Kettner rose to prominence for having early foreseen the current stock market bull run. But last month, he cut his equity bets for the first time in months, believing that a sharp shift in investor sentiment meant a more cautious approach was necessary before the midterm elections.
Referring to the initial rally that followed the vote, he said: "Wednesday was really strange. People asked me, 'Why are you still so cautious? Why are you still on the sidelines? What are you doing?'"
In Kettner's view, the various explanations for stocks first rising and then plunging on Thursday look more like finding reasons for price moves after the market action genuinely surprised investors. That day, the S&P 500 posted its worst single-day performance since April 2025, while the Nasdaq 100 and semiconductor index suffered their biggest drops since March 2020.
Kettner compared the current market environment to January-February 2018, when volatility products collapsed. He warned that the present selloff looks more like position clearing triggered by the unwinding of momentum trades, rather than investors genuinely reassessing fundamentals.
Turning specifically to the AI thematic trade, Kettner said hyperscalers' share prices could find support because computing power is becoming scarcer and more expensive, which could be a positive for companies that have ready-made capacity to rent out. He also said semiconductor stocks could at some point "rise simply because of a short squeeze, say surging 20% or 30% in two days," but admitted he doesn't know when that moment will arrive.
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