Reported details about Anthropic's financial progress are adding to concerns about the health of the AI ecosystem
Nvidia's stock was down Thursday morning.
A prominent ETF tracking the chip sector is set to fall for the eighth consecutive day as investors continue to worry about the state of artificial-intelligence spending.
Now Wall Street has a new source of concern. AI startup Anthropic gave a quarterly revenue update in a private meeting with investors, reportedly showing a slowdown in growth. The Claude maker reported that its third-quarter revenue was up to $16.8 billion in the September quarter, according to the Financial Times. Although that demonstrated sequential growth of almost 50%, Anthropic had seen revenue grow almost 145% sequentially in the second quarter.
"The market appears to be reading the Anthropic update as negative, which is understandable considering how on-edge the market has been anyway about the AI trade," D.A. Davidson analyst Gil Luria said in a note to clients.
From his perspective, the update was "more mixed." Encouragingly, Anthropic reported positive cash flow in the third quarter, according to the Financial Times, and Luria said that should be a sign to investors that the company and OpenAI are not "inherently unprofitable businesses that could never be profitable."
But positive elements like that couldn't stem the bleeding in prominent chip stocks like Micron Technology (MU), down 4.6% in early morning trading, while Intel's (INTC) was declining 4%. Shares of AI chip makers Advanced Micro Devices (AMD) and Nvidia (NVDA) were both off 3.5% and 1.8%, respectively, ahead of the market open Thursday. Sandisk's stock (SNDK) was down 5.9%.
The chip sector in general has been under pressure for days, with the iShares Semiconductor ETF SOXX on pace for its eighth session of declines after losing about 12% over the last seven trading days. The ETF is headed toward its longest losing streak since an eight-session one 11 years ago, according to Dow Jones Market Data.
James Vrachas, an executive director at investment bank Post Oak Group, said chip stocks have "priced in an enormous amount of future growth," meaning share prices already reflect those expectations. Against that backdrop, a slight shift in sentiment or questions about spending can significantly impact shares, he told MarketWatch.
He said investors should focus on earnings forecasts, profitability, cash flow and commitments to AI spending.
"There's a difference between believing in the long-term potential of AI and believing every company exposed to that growth is appropriately valued," he said in emailed comments.
-Britney Nguyen
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