Investors in artificial-intelligence stocks had been sweating Anthropic's IPO filing - but now that it's out, they're flooding back into the sector.
After experiencing a sustained selloff in previous weeks over concerns of overspending and unsustainable debt levels, tech stocks moved higher on Tuesday as investors regained some confidence in the sustainability of AI spending. Anthropic's prospectus indicated a healthier financial position than some investors feared, leading to a feeling of relief on Wall Street.
The Nasdaq Composite COMP ended the day up 1.2% after rising 0.8% on Monday, the day Anthropic filed for its initial public offering.
Leading the rally were some of the names that were hit hardest by earlier interest-rate and macroeconomic fears. Shares of neoclouds Nebius Group (NBIS) and CoreWeave (CRWV) rose 11.2% and 8%, respectively - even as Elon Musk made comments over the weekend predicting dwindling access to capital and "guppy-level death" for the new-age cloud-service providers.
Storage makers also got a boost on Tuesday, with shares of Western Digital up 7% and Seagate Technology Holdings (STX) up 3.7%.
Anthropic's IPO filing continued to drive AI-related stocks on Tuesday, according to Louis Navellier, an analyst at InvestorPlace. The company's S-1 filing "is generating a lot of excitement," Navellier said in a note to clients. The registration statement provided increased transparency on the company's business model and showed impressive growth: Anthropic's revenue for the first half of this year reached $16.3 billion, increasing nearly 14-fold from the previous year.
Despite its operating losses, the company's "stunning" revenue growth has Navellier expecting a "grossly oversubscribed" IPO, meaning total demand for its shares could be higher than what's made available.
As investors have had time to dive into the report, they are seeing many of the same factors that helped drive up AI infrastructure stocks earlier this year, Rob Thummel, a senior portfolio manager at Tortoise Capital, told MarketWatch.
For one, Anthropic is making "significant commitments to capital spending for an extended period of time," he said. And as demand for computing power continues to rise, so will the demand for infrastructure to support those deployments, Thummel added. That includes services from the neoclouds, which rent out computing capacity to customers.
Dell Technologies (DELL), which has seen its stock soar this year on enthusiasm for AI servers, finished Tuesday up 7.5%. Optical stocks, which were among the S&P 500's SPX top gainers on Monday, continued the rally Tuesday, with Coherent (COHR) up 6.4% and Lumentum Holdings up 5.9% at market close. Fellow AI connectivity providers Credo Technology (CRDO) and Astera Labs (ALAB) also climbed 10.8% and 10.5%, respectively, on Tuesday.
Thummel also pointed to some of the contracts Anthropic has made to secure computing power in the future, which he said reflects confidence that demand for AI infrastructure "will continue to be tremendous for a while."
While it's unclear what the pricing and demand will look like, Anthropic's IPO is definitely a bullish signal, Celine Woo, portfolio manager at Lazard Asset Management, told MarketWatch. "There's still ample appetite in the market from the investor's point of view to own this part of the business model," she said.
Anthropic's business model - along with that of its competitors - is one that will require a lot of chips and processing power to maintain. Plus, investors seem to be broadly feeling renewed confidence in the strength of the AI boom as companies report their third-quarter results. Companies like ASML (ASML) and Taiwan Semiconductor Manufacturing Co. posted earnings beats as a result of unrelenting demand for advanced chip technologies, each offering an "optimistic outlook" for the sector, Michael Field, Morningstar's chief European equity strategist, wrote in a Monday note.
The Big Tech companies driving the AI spending surge also have no plans of slowing down. After a strong earnings report last week, Meta (META) announced plans to raise up to $95 billion through equity offerings on Monday. The other three big cloud companies - Alphabet (GOOGL) (GOOG), Microsoft (MSFT) and Amazon.com (AMZN) - report earnings later this week.
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