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Steve Eisman: Here's What Anthropic Isn't Telling You

https://www.youtube.com/watch?v=8uoSVG3P6z0

TLDR Anthropic’s IPO filing raises serious questions about whether its AI business can justify more than $800 billion in future compute commitments, especially as growth slows, prices may be falling, and investors would have little control. The discussion also compares autonomous-vehicle leaders, with Waymo far ahead of Tesla in paid rides, and highlights investment opportunities and risks across robotaxis, lidar, fleet services, and autonomous trucking.

Key Insights

1. Separate Reported Results from Accounting Effects

When evaluating Anthropic’s S-1, distinguish operating performance from accounting changes. The reported $80 billion first-half net loss was largely linked to an increase in the fair value of convertible notes, rather than cash operating losses alone. However, that accounting explanation does not remove the underlying risks of high spending and uncertain profitability. Investors should review cash flow, operating costs, and financing commitments alongside headline net income.

2. Check Recent Growth, Not Just the Strongest Period

A company’s latest growth trend can differ sharply from the period emphasized in its IPO materials. Anthropic’s reported sequential revenue growth slowed from 147% in the first half to 45% in the third quarter, while revenue relative to compute and infrastructure costs also declined. The S-1’s headline charts reportedly did not include third-quarter results, making them a backward-looking snapshot. Before assessing an IPO, compare current performance with earlier surges and investigate whether new competitors have changed demand.

3. Test Whether Price Cuts Can Produce Profitable Market Share

Lower prices may attract customers, but they only strengthen a business if the added market share supports sustainable revenue and margins. Steve Eisman said he had heard, but could not confirm, that Anthropic cut prices by about 50% in October to regain share. If a company must rely on steep discounts in a market with few durable competitive moats, large spending commitments become especially risky. Investors should look for evidence that price reductions improve customer retention, usage, and revenue enough to offset lower prices.

4. Compare Long-Term Commitments with the Ability to Fund Them

Large future infrastructure obligations can weigh on earnings even before the costs appear prominently in financial statements. Anthropic reportedly has more than $800 billion in future compute commitments and expects to increase capital spending, creating uncertainty about the scale of future losses. Assess whether projected revenue can support those commitments and whether the company will need additional financing. For infrastructure businesses such as CoreWeave, also examine borrowing costs: debt near 15% can make a model dependent on repeated borrowing difficult to sustain.

5. Examine Who Controls the Company and What Shareholders Can Influence

An IPO does not necessarily give public investors meaningful control over a company. Anthropic’s reported share structure gives a single Class F share controlled by its seven co-founders 50.1% of the vote, while a long-term benefit trust helps select the board. Investors should read governance disclosures carefully, including voting rights, board appointment procedures, and the influence of founders or special trusts. Strong founder control may support long-term decision-making, but it can also limit public shareholders’ ability to shape corporate policy.

6. Evaluate Autonomous-Vehicle Companies by Deployment and Economics

To compare autonomous-vehicle businesses, look beyond announcements and focus on paid rides, operating locations, safety, and unit economics. Waymo was described as the U.S. leader, operating in 15 cities and providing about 500,000 paid rides each week, while Tesla combines supervised Full Self-Driving with a growing robotaxi effort. Tesla’s planned Cyber Cab production cost of about $25,000 could be an advantage, but scale and real-world performance matter too. Amazon’s Zoox remains earlier-stage, and Uber relies on partnerships rather than its own autonomous vehicles and technology.

7. Account for Regulation, Public Trust, and the Wider Supply Chain

Autonomous-vehicle adoption depends on more than the technology itself. U.S. companies must navigate state-by-state approval processes, while driver and labor groups add pressure to the regulatory debate. Public confidence also matters: a Gallup poll found that the share of Americans who believe autonomous vehicles improve road safety fell 12 percentage points from 2018. Investors looking beyond vehicle makers can research lidar suppliers, fleet maintenance and service providers such as car-rental firms, and autonomous trucking companies such as Aurora and Tesla.

Questions & Answers

What financial concerns did Steve Eisman raise about Anthropic’s S-1 filing?

Eisman questioned whether Anthropic’s business model is financially viable, pointing to more than $800 billion in future compute commitments and planned capital spending that could weigh heavily on earnings. He also noted that reported revenue growth slowed sharply in the third quarter.

Why did Anthropic’s reported losses increase, and what might happen to them?

Anthropic’s reported $80 billion first-half net loss was largely an accounting effect related to the rising fair value of convertible notes. Despite reducing losses year over year, its future compute commitments and expected capital expenditures could cause losses to grow substantially.

What did Eisman say about Anthropic’s reported growth and pricing?

Reported sequential revenue growth fell from 147% to 45% in the third quarter, while revenue relative to compute and infrastructure costs declined from 2.08 to 1.7. Eisman had heard, but could not confirm, that Anthropic cut prices by about 50% in October. He said such cuts are risky unless lower prices bring enough market share to increase revenue.

What governance concerns did Eisman raise about Anthropic?

He said public shareholders would have little control: a single Class F share controlled by the seven co-founders carries 50.1% of the vote, and a long-term benefit trust helps choose the board. He described this model as “founder worship institutionalized.”

What should investors watch for in Anthropic’s IPO?

Investors should watch the company’s third-quarter results, which were omitted from the S-1’s headline charts, and assess whether its growth, pricing, and spending commitments support its valuation. Eisman said he had no expectation for the IPO valuation and that the effect of the filing on investor sentiment is uncertain.

What risk did Eisman identify in CoreWeave’s business model?

CoreWeave borrows to build AI data centers, and its debt costs roughly 15% in interest. Eisman warned that borrowing at that rate may be prohibitive for a business model dependent on continually raising debt.

Which companies are leading the autonomous-vehicle market?

Waymo leads the U.S. market, operating in 15 cities and providing about 500,000 paid rides per week—roughly seven times Tesla’s weekly mileage. Tesla has expanded quickly and has a cost advantage with Cyber Cabs that cost about $25,000 to produce, but it remains well behind Waymo. Amazon’s Zoox is at an earlier stage, while Uber offers autonomous rides through partnerships.

How do Tesla’s autonomous-vehicle offerings differ?

Tesla’s autonomous business includes supervised Full Self-Driving, used by about 1.7 million customers, as well as its robotaxi service.

What are the main global and regulatory dynamics in autonomous vehicles?

The U.S. leads in commercialization, while China has an advantage in manufacturing lower-cost vehicles. The Middle East and Europe have so far leaned toward Chinese companies. In the U.S., fragmented state-by-state regulation means companies must navigate separate approval processes and has fueled lobbying disputes between robotaxi companies and driver and labor groups.

What safety and public-opinion trends were discussed about autonomous vehicles?

About 40,000 Americans and more than a million people worldwide die in car crashes each year, and 94% of crashes are attributed to human error. However, a Gallup poll found that the share of Americans who believe autonomous vehicles improve road safety fell 12 percentage points from 2018, possibly reflecting broader negative sentiment toward AI.

What investment opportunities related to autonomous vehicles were suggested?

Suggested areas included U.S. lidar-sensor makers, companies that maintain and service vehicle fleets—including car-rental firms such as Hertz—and autonomous-trucking companies such as Aurora and Tesla.

Summary of Timestamps

Steve Eisman says Anthropic’s S-1 filing raises serious questions about whether the company’s business model is financially sustainable. He points to more than $800 billion in future capital commitments and plans for much higher spending, costs that could eventually pressure earnings even if they are not yet obvious in the main financial statements.

Anthropic’s reported growth slowed sharply in the third quarter after a first-half surge in AI-token usage. Sequential revenue growth reportedly declined from 147% to 45%, while revenue compared with compute and infrastructure costs fell from 2.08 to 1.7. Eisman says the S-1’s headline charts leave out Q3 results, making them a backward-looking view of growth at its peak.

Eisman says he heard, but could not confirm, that Anthropic cut prices by about 50% in October to win back market share. He sees this as a key detail for IPO investors: lower prices could be risky unless they attract enough customers to increase revenue and strengthen the company’s competitive position.

He questions whether Anthropic has a strong competitive moat, arguing that relying on price cuts to gain share would make its huge investment commitments particularly risky. He also criticizes the company’s governance structure, where a single Class F share held by the seven co-founders controls 50.1% of the vote, and a long-term benefit trust helps select the board.

Eisman describes Anthropic’s governance as an institutionalized form of founder control, similar to arrangements at companies such as Meta. He offers no IPO valuation estimate, but says investors may have felt reassured by the S-1 because it did not foreground the limited financial reporting through Q2. Third-quarter results could shift sentiment, although he says the market’s reaction is difficult to predict.

The discussion also highlights debt risk at CoreWeave. With borrowing costs around 15%, financing the construction of AI data centers could be prohibitively expensive. Because the company’s model depends on borrowing to build those facilities, investors are encouraged to watch its debt closely.

The program shifts to autonomous vehicles and asks which companies are best positioned as Tesla’s robotaxi rollout faces competition from Alphabet, Amazon, and Uber. The broader promise of the technology is improved road safety: roughly 40,000 Americans and more than one million people worldwide die in car crashes each year, with human error attributed to 94% of crashes.

Dan Shalon says Tesla’s autonomous-vehicle business includes supervised Full Self-Driving, used by about 1.7 million customers, as well as its robotaxi service. Tesla has expanded quickly and may benefit from Cyber Cabs that cost about $25,000 to produce, but it still trails Waymo in the U.S. robotaxi market.

Waymo is the U.S. leader, operating in 15 cities and providing about 500,000 paid rides each week—around seven times Tesla’s weekly mileage. Amazon’s Zoox is at an earlier stage, while Uber offers autonomous rides through partnerships rather than developing its own vehicles or self-driving technology.

The U.S. leads in bringing autonomous vehicles to market, while China has an advantage in manufacturing lower-cost vehicles. The Middle East and Europe have so far leaned toward Chinese companies. In the U.S., regulation varies by state, forcing companies to navigate separate approval processes and contributing to lobbying conflicts with driver and labor groups.

Public confidence in autonomous vehicles has weakened: a Gallup poll found that the share of Americans who believe self-driving vehicles improve road safety fell by 12 percentage points since 2018. This decline has occurred despite advances in safety and may reflect broader negative sentiment toward AI.

Potential investment opportunities in autonomous vehicles include U.S. lidar-sensor makers, companies that maintain and service vehicle fleets—such as car-rental firms including Hertz—and autonomous trucking companies such as Aurora and Tesla. These areas may offer ways to invest in the sector beyond robotaxi operators.

Returning to Anthropic, the reported $80 billion first-half net loss was largely an accounting effect related to the rising fair value of convertible notes. However, revenue growth slowed considerably in Q3 after surging earlier in the year, and the company’s future compute commitments and expected capital spending could cause losses to increase.

The speakers emphasize that Anthropic’s S-1 does not prove the company is bad, but it does leave its business model unproven and its investment highly risky. Investors should distinguish that uncertainty from the image of a safe, established business that a high valuation might suggest.

The segment closes with the prediction that the landscape will look very different next year. The speaker thanks viewers for watching Property Markets from Profit Media and invites them to subscribe to the YouTube channel and tune in again tomorrow.