Below are some of the most interesting things I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
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Jen Harris writes, “Artificial intelligence is fast becoming the largest investment in U.S. history. As the money pours in, the companies involved are resurrecting bad old habits eerily reminiscent of the shenanigans deployed in the run-up to the financial crisis.”
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That investment boom has now led us to what aspires to be the largest IPO in history next month: Anthropic PBC. Analyzing its S-1, Rod Dubitsky notes that, “All of its hard and soft multi-year commitments combined are 169x the latest annualized operating income.”
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What’s more, there are loads of other companies whose future earnings depend on those commitment being met. Joachim Klement points out, “One thing we learned once the DotCom bubble burst was that analysts often sought to justify extremely high share prices by ramping up growth expectations, shifting excessive EPS growth into the outer years where there is less scrutiny of their assumptions.”
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Generating the revenues to pay for them will require a very deep and wide moat. “For investors, understanding the source and sustainability of a company’s competitive advantage is critical to assessing its long-term value. With the proliferation of AI, the moat discussion is becoming even more important,” Torsten Slok argues.
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These questions seem to be causing some investor agita. “For pension officials and the workers they serve, some of the anxiety stems from past crashes. That includes the global financial crisis, which delivered a major financial blow to public pensions, swelling the gap between their existing assets and future liabilities by hundreds of billions of dollars.” reports The New York Times.
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