Over the past week, I have been speaking with individuals attending the Morgan Stanley annual Technology, Media, and Telecom conference held at the Palace Hotel. Even before the recent conflict emerged between the Pentagon and Anthropic, the event was poised to be significant, featuring a lineup that included highly valued private startups like OpenAI and Anthropic, whose rapid growth is profoundly impacting software stocks.
According to attendees, there was keen interest in hearing from the CEOs of both OpenAI and Anthropic, with both speaking sessions drawing large, crowded audiences. However, Anthropic emerged as the primary topic of conversation among many participants.
Naturally, numerous attendees were eager to hear the first public comments from Anthropic's CEO, Dario Amodei, following the dispute that arose late last week between the company and the Pentagon over the military use of AI. This conflict prompted strong statements from U.S. President Donald Trump and Defense Secretary Pete Hergeseth, with the latter even ordering other military contractors to cease cooperation with Anthropic.
Nevertheless, this dispute was not the only headline capturing investor attention. In less than six months, Anthropic's explosive growth has fueled significant anticipation among public market investors regarding its potential initial public offering. As reported this week, the company's annualized revenue is approaching $20 billion, more than doubling since the end of last year and significantly narrowing the gap with its larger, longer-established competitor, OpenAI.
Investors also noted Anthropic's management's greater emphasis on discipline, with the company focusing on selling products to large enterprises. In fact, managers of mutual funds and other investment funds observed that Anthropic's series of product launches have created substantial waves in the stock market, negatively impacting the share prices of cybersecurity firms, software providers like IBM, and financial services companies.
In contrast, OpenAI is pursuing a diversified portfolio of projects, including a popular consumer chatbot, AI agents for large enterprises, and AI-driven hardware devices and data centers. According to a report this week, OpenAI has abandoned plans to sell goods directly within ChatGPT, opting instead to implement checkout functionality within apps that integrate with ChatGPT—a sign the company may be narrowing its overly broad ambitions.
The discussion surrounding OpenAI was markedly different from conversations at the Palace Hotel during the last conference. Six months ago, at the Goldman Sachs annual technology conference, the buzz was all about OpenAI's then-recent blockbuster deals with cloud providers like Oracle. At that time, Anthropic, represented only by its CFO, Krishna Rao, received considerably less attention.
Despite this, investors were still excited about OpenAI CEO Sam Altman's appearance at 7 a.m. on Thursday—a morning slot originally scheduled for CFO Sarah Friar's presentation on Wednesday afternoon. OpenAI's own growth remains formidable: reports indicate that as of the end of February, its annualized revenue exceeded $25 billion, with monthly active users surpassing 920 million.
Another sign of the times was investors' eagerness to hear from leaders of semiconductor, memory, and other hardware companies benefiting from the AI boom. Seagate, SanDisk, Astera Labs, and Coherent occupied the largest banquet halls, while most software companies were assigned to smaller meeting rooms upstairs.
In an interview, David Chen, Co-Head of Global Technology Investment Banking at Morgan Stanley, remarked, "Some investors say, 'It's hard for me to figure out who will win at the application layer, but I know who will win—storage, hard drives, because you need physical storage to train large language models and ultimately perform inference.'"
For software companies, executives are grappling with a different question. Chen stated, "Is AI ultimately a threat, or do you possess enough distinctive qualities to build a strong moat within the AI landscape?"
A sell-off in software stocks has dampened the prospects for IPOs from private software companies. However, companies perceived as less vulnerable to AI disruption, or even beneficiaries of the trend, can still attract favor from public market investors. This line of thinking applies not only to the three high-profile super-IPO candidates—SpaceX, Anthropic, and OpenAI.
I learned that speaking sessions for Applied Intuition, a nine-year-old autonomous vehicle simulation software company; Kalshi, a prediction markets startup; and ElevenLabs, an AI voice startup, were all filled to capacity. Other notable potential IPO candidates include Faire, a nine-year-old e-commerce startup, and Ramp, a seven-year-old provider of corporate cards and expense management services.
Perhaps the clearest signal that investment banks are preparing for a more active IPO year is the return of a familiar face: Michael Grimes. The star Morgan Stanley banker, who had a brief stint in the Trump administration, recently returned to investment banking and, known for his close ties to SpaceX CEO Elon Musk, was a frequent presence throughout the conference.
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