Anthropic's S-1 Packs in More Than 90 Pages of Risk Factors. Here Are the Ones Investors Should Watch.

Anthropic, the AI company behind the popular Claude chatbot, filed for an initial public offering (IPO) this week with the Securities and Exchange Commission.

Media outlets are reporting that the IPO is planned for mid-November, and the company's S-1 filing indicates it plans to list on Nasdaq under the ticker "ANT." That filing, which every company must submit before going public, spells out the financials, business model, executive compensation, governance structure, and much else about Anthropic. It also contains more than 90 pages of risk factors, or what could go wrong and jeopardize shareholders (a typical risk factor section is more like 30 to 50 pages).

So, what risk factors should investors care about most for Anthropic?

First and foremost, the filing states that "the market for compute is intensely competitive," and that Anthropic competes for access to compute "with some of the world's largest and most well-capitalized technology companies." Anthropic sells AI services through its various AI models, and it must buy or lease computing power (compute) to train and run them. Estimates put the company's compute spending at $750 billion over the next decade. So, failing to secure sufficient compute is a huge risk factor.

Similarly, the company says there will be competition to secure the specialized chips, memory, and data center equipment necessary for its AI workloads. Geopolitical tensions between Taiwan, where most advanced chips are made, and China only exacerbate that risk. Finding all the electrical power it needs will also pose a risk to the company.

Continued access to the capital it needs to support its business model is another risk, as many AI companies are tapping international capital markets, which makes borrowing terms less favorable.

Intense competition is a major risk for Anthropic

Intense competition by other companies selling AI models and applications similar to Claude is another major risk. The S-1 filing identifies Alphabet and OpenAI Group as its primary competitors and states that it must differentiate its products from theirs or face decline.

Anthropic also mentions political backlash to the growth of AI as a major risk. We're already seeing some of that with Americans in many states rejecting new data centers in their counties and towns. In the same vein, the use of Anthropic's products by malicious actors such as hackers or terrorists could jeopardize the company's fortunes.

And the possibility that Anthropic's AI models could undertake harmful actions on their own is also a major risk. The filing states that "sufficiently advanced AI systems could, if not developed, deployed, and operated with appropriate safeguards, oversight, and security measures, pose catastrophic or existential risks to humanity, particularly if such systems were misused, replicated, weaponized, or allowed to operate with a high degree of autonomy."

That's a scary threat, which extends well beyond Anthropic and its shareholders.

Investing in any company comes with risks, but AI companies are a whole new breed. Investors will have to be even more careful before committing their hard-won capital.

Matthew Benjamin has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.