Video conferencing company Zoom Communications' 2023 investment in Claude AI model developer Anthropic is becoming a major market focus, with the paper value of this early-stage investment potentially having surged to between $2 billion and $4 billion. Zoom's stock price soared 9.8% on Monday to $94.22, marking its highest closing price since August 22, 2022. Baird equity research analyst William V. Power noted in a report that while the market primarily focuses on Zoom's revenue growth and AI business opportunities, the potential profit boost from its $51 million investment in Anthropic cannot be overlooked. Anthropic's valuation is rising rapidly. According to a Wall Street Journal report earlier this month, Anthropic, the developer of the Claude AI model, plans a new $10 billion private funding round at a valuation of $350 billion. At this valuation, Zoom's stake would be worth $2 billion to $4 billion. The value of the Anthropic investment is materializing, significantly boosting third-quarter profits. Zoom made a strategic investment in Anthropic through its venture capital arm in the first quarter of 2023. Although the company never explicitly stated that the entire $51 million strategic investment reported that quarter was directed to Anthropic, Baird's research division believes the disclosed amount was fully invested in Anthropic. This investment has already begun to appear on Zoom's financial statements. The company reported $406.1 million in strategic investment gains for the third quarter, which Baird's research estimates were mostly, if not entirely, derived from the paper appreciation of the Anthropic holding. As news emerges of Anthropic's potential IPO plans, the investment's prospective returns are sparking market speculation. "A key question is how much more its value can rise as Anthropic potentially looks toward an IPO," Power wrote in the report. The strategic investment brings synergistic benefits, providing technological support for Zoom's AI business. Beyond financial returns, the Anthropic investment provides Zoom with a strategic advantage for its AI product development. Zoom is continuously building and commercializing AI tools to help customers with tasks such as meeting transcription and summarization. "Zoom has a strong R&D engine and has been exploring AI for years," Power noted, mentioning the company's partnership with Anthropic. "We see potential for the Zoom platform to add more AI functionality in the future." This collaboration gives Zoom a differentiated edge in the highly competitive enterprise communications market, directly benefiting from Anthropic's technological breakthroughs in the generative AI space. Market ratings remain cautious, and the stock remains far from its pandemic peak. Despite the positive surprise from the Anthropic investment, analysts maintain a cautious outlook on Zoom's stock price. Among the 33 analysts surveyed by FactSet, 52% assign a Buy or equivalent rating, with an average price target of $96.40. This Buy-rating ratio is below the average of approximately 56% for S&P 500 component stocks. Baird's research department maintains an "Outperform" rating on Zoom stock with a $95 price target. Despite Monday's significant surge, Zoom's share price remains approximately 83% below its all-time high reached in October 2020 during the pandemic. The company, which enjoyed immense popularity during the COVID-19 pandemic, is now seeking new growth drivers through AI transformation and strategic investments. Whether this strategic investment in Anthropic can help it recapture its former glory is something the market is still watching.
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