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Anthropic’s $518B AI Bet: Will Markets Endure the Risks and Rewards?

Anthropic’s Ambitious AI Investment and Market Implications

A look at the day ahead in European and global markets from Tom Westbrook

Anthropic’s Vision: Transforming the Global Economy

Anthropic is making a massive bet that AI will transform the global economy and that public investors will pay to underwrite it.

The prospectus of the US AI company, seen by Reuters, lays out $518 billion in spending plans as it seeks to stake out the frontiers of a technology pitched as a bigger deal than industrialisation, electricity and the internet.

Timing and Internal Debate

It's headed to market after the November midterms, and in the midst of increasingly public questions — even from within Anthropic — about the speed and direction of AI development.

This month an Anthropic researcher quit the firm, warning that the pace ​of AI development poses an existential threat, possibly within a decade. Another researcher at the firm said the odds of human extinction exceeded 10%.

Calls for Caution in AI Development

CEO Dario Amodei has called, along with rivals at OpenAI, Google's DeepMind, Microsoft and xAI, to slow the development of increasingly capable AI systems.

Market Response and Financial Backdrop

Markets, for now, are staying pretty sanguine despite risks which, Anthropic's prospectus discloses, also include the company earning nearly a quarter of its revenue from two customers. A week ago the Nasdaq stood at a record high.

Yet elsewhere the financial backdrop is growing more hostile.

Rising Yields and Economic Shifts

Sovereign yields have put in a big rise through September and benchmark 10-year rates trade around their highest for decades across major economies.

Increasingly, investors think that the data-centre building boom that's boosting growth, employment and commodity prices is going to put the economy on a footing where it can bear higher interest rates for longer.

Implications for Borrowing and Spending

That means a durable period where companies pay more to borrow, households spend more servicing debts and government interest bills go up, leaving less money for social programmes.

Testing Market Enthusiasm Amid Rising Rates

Anthropic's sale will test whether enthusiasm for the AI trade can withstand rising rates and scrutiny.

Key Developments to Watch

Key developments that could influence markets on Tuesday:

• Economics: Canada GDP, US job openings and consumer confidence

• Fed speakers: Goolsbee and Williams

(Editing by Sonali Paul)