Anthropic IPO Nears as Investors Sell AI Stocks to Buy More AI?

Intel Corp. shares plunged after the chipmaker issued weaker guidance, while Amazon.com Inc. fell despite strong cloud growth as both companies failed to meet elevated investor expectations. On Wall Street, concerns are building that AI-linked stocks have further to fall even as anticipation grows for Anthropic’s initial public offering. Investors are also watching how changes in congressional control after the U.S. midterm elections could ripple through financial markets.

1. Intel Plunges 26%; Morgan Stanley Says Stock Still Lacks Appeal

Intel shares tumbled 26% in premarket trading on Oct. 30. The drop followed slowing PC demand, weak guidance and an accident at a production facility in Israel.

Intel forecast fourth-quarter revenue of $15 billion to $16 billion. That was well below the $17.1 billion Wall Street estimate compiled by FactSet. Third-quarter revenue from the PC business also declined, defying expectations.

If the drop holds through the regular session, Intel would suffer its biggest one-day decline in more than two years. Its market value could shrink by more than $100 billion. Rival Advanced Micro Devices Inc. also slid more than 6% in after-hours trading after Intel released results.

Intel cited surging memory-chip prices as a key reason for weakness in its PC business. Chief Financial Officer David Zinsner said higher memory prices and tighter corporate IT budgets are weighing on PC demand.

Higher memory prices raise costs for PC makers. That can feed into higher prices for finished products and weaker consumer demand. Corporate demand for replacement work laptops is also easing.

An explosion earlier this month at a semiconductor manufacturing facility in Israel also reduced Intel’s fourth-quarter revenue outlook by $300 million.

Demand for central processing units used in AI servers is rising quickly. The spread of AI agents is increasing the importance of server CPUs alongside GPUs. Intel, however, has been unable to fully translate that demand into revenue because of shortages in some components.

The key to a longer-term recovery is the foundry business. Customer interest in advanced semiconductor packaging is increasing, but Intel still needs enough long-term customer contracts to justify heavy capital spending.

Morgan Stanley said Intel remains unattractive even after the sharp selloff. A team led by analyst Joseph Moore expects Intel to keep losing CPU market share to AMD, Nvidia Corp., Amazon and Alphabet Inc.’s Google.

Morgan Stanley expects the CPU market to grow about 30% by 2027, but sees rivals expanding faster than Intel.

Jefferies also acknowledged the growth potential of Intel’s data-center and AI businesses, while citing concerns about market-share losses and uncertainty surrounding the foundry unit.

2. Amazon Falls 7%; AWS Growth Still Misses Lofty Expectations

Amazon shares fell about 7% in after-hours trading on Oct. 29 after third-quarter revenue and earnings per share both missed Wall Street estimates and slower advertising growth weighed on sentiment.

Third-quarter revenue rose 12% from a year earlier to $201.9 billion. That was slightly below the $202.2 billion Wall Street estimate. Earnings per share came in at $1.89, missing the $1.97 consensus.

Amazon projected fourth-quarter revenue of $240 billion to $247 billion. The $244.2 billion Wall Street estimate was within that range, but the forecast did not materially exceed expectations.

The cloud business drew the most attention. Third-quarter revenue at Amazon Web Services rose 39.3% from a year earlier. On an annualized basis, that amounted to $184 billion in revenue.

That topped the official Wall Street growth estimate of 38%. It still fell short of the 40%-plus growth some institutional investors had been looking for. Even with rapid cloud growth, Amazon failed to clear the market’s higher bar.

Chief Executive Officer Andy Jassy said AWS is installing one AI accelerator roughly every 14 seconds. That works out to about 6,200 a day. AWS backlog also climbed to $578 billion.

Customer revenue commitments tied to Amazon’s in-house Graviton server CPU and Trainium AI accelerator have increased more than twentyfold from a year earlier. The company plans to start selling Trainium to customers outside AWS from the end of 2027.

Concern is building around the advertising business. Third-quarter ad revenue growth slowed to 12%, well below the 18% Wall Street estimate.

Amazon said the shift of its Prime Day event from the third quarter last year to the second quarter this year was a main reason. It expects ad growth to recover to the high teens in the fourth quarter.

Over the longer term, the spread of AI shopping agents is emerging as a new threat. If consumers search for and buy products through AI tools, they may be less likely to search directly on Amazon’s marketplace or click on ads.

Amazon operates its own AI shopping agent, but is limiting access to its platform by outside AI agents. Jassy said shopping through third-party AI agents is still not more convenient than existing methods.

3. Amazon CEO Says It Can Build Two $1 Trillion Revenue Businesses

Jassy said Amazon could have two businesses generating $1 trillion in annual revenue within the next decade.

He said AWS and the retail business could each reach $1 trillion in annual revenue. Together, that would turn Amazon into a company with $2 trillion in annual sales.

Amazon’s total revenue this year is forecast at about $829 billion. The highest annual revenue ever recorded by a company is believed to be Walmart Inc.’s roughly $713 billion.

MarketWatch calculated that if Amazon reaches $2 trillion in revenue and maintains its third-quarter operating margin of 13.9%, annual operating profit would come to about $280 billion.

Applying a 15-times earnings multiple would imply a valuation of about $4.2 trillion. That would be more than 60% above the company’s current market capitalization of about $2.6 trillion.

That is a simple calculation based on the assumption that the operating margin and valuation multiple remain unchanged.

Wall Street’s current forecasts are more conservative than Jassy’s target. According to Visible Alpha, analysts expect Amazon’s total revenue in 2032 to reach about $1.78 trillion. Of that, retail revenue is projected at about $1.05 trillion.

Morgan Stanley said in August that AWS could reach $1 trillion in annual revenue within the next eight to 10 years.

Analyst Brian Nowak said a scenario in which AWS adds 8 gigawatts of data-center power capacity a year is reasonable.

Citigroup also said AWS could reach $1 trillion in revenue within the next five to 10 years if it sustains annual growth of around 40%.

The key question is how quickly Amazon can turn massive data-center investment into actual revenue and profit.

4. Anthropic IPO Emerges as Test of Wall Street Funding Capacity

The blockbuster IPO being pursued by AI company Anthropic is shaping up as a major test for U.S. financial markets.

Bloomberg Opinion columnist Chris Hughes wrote on Oct. 30 that the success of Anthropic’s listing could have a meaningful effect not only on the stock market but also on credit markets.

Anthropic, which developed the Claude chatbot, is pursuing a fundraising plan of at least $86 billion. Reuters reported the total could reach as much as $100 billion.

That would exceed the $86 billion SpaceX raised through an IPO in June.

The question is whether investors can supply another $100 billion in fresh capital after already pouring huge sums into the AI industry.

There are some positive signs. Meta Platforms Inc. this week announced plans for stock issuance totaling $95 billion. It first raised $38 billion through common and preferred shares and plans to secure about $60 billion more starting next year.

Nvidia, AMD and Broadcom Inc. are also buying some of the shares, but most of the money is expected to come from ordinary equity investors.

Meta shares fell less than 2% on the day the capital-raising plan was announced. That has been read as a sign the market still has room to absorb large-scale AI investment funding.

Meta’s share sale is different from an Anthropic IPO, however. Meta is a listed company with known profitability and financial structure. Anthropic would be asking public-equity investors for a large amount of capital for the first time.

Market conditions are also a headwind. The yield on the 10-year U.S. Treasury note has risen to around 5% recently from about 4.5% in June. The average gain for U.S. IPO stocks after listing this year is just 2%, according to Bloomberg data.

Another concern is selling pressure on existing stocks.

If institutional investors sell current holdings to buy Anthropic shares, that could create supply pressure for megacap technology stocks including Nvidia and Microsoft Corp.

Deutsche Bank, however, said a pickup in new share issuance could be offset in large part by buybacks from other companies and strong investor demand.

5. Capital Economics Says S&P 500 Could Fall 16% if AI Bubble Deflates

Capital Economics, which had predicted a slowdown in the rally for AI-linked stocks, is warning of further downside for U.S. equities.

Chief Markets Economist James Riley laid out a bearish view in early September, saying the run-up in AI-related stocks was nearing its end.

That call has drawn attention as concerns mount over the profitability of Big Tech’s huge AI investments.

In a report published on Oct. 29, Capital Economics said the S&P 500 could fall to 6,500 by the end of 2027 if the bubble in AI stocks deflates gradually or bursts sharply.

That would be about 16% below the index level at the time. The firm also said a final tech-led rally could still emerge before the end of this year.

Capital Economics identified consumer staples as the most promising defensive sector over the next 12 months.

Food, beverages and household goods tend to see stable demand regardless of the economy. After the 2000 dot-com bubble burst, consumer staples also outperformed on a relative basis.

The firm also viewed real estate as an attractive area for investment.

If AI stocks fall sharply, U.S. Treasury yields could decline and bond prices could rise.

According to Capital Economics, all eight instances since 1995 in which the Philadelphia Semiconductor Index dropped more than 35% were accompanied by a decline in the U.S. 10-year Treasury yield.

Lower Treasury yields could benefit real estate, which is sensitive to borrowing costs.

By contrast, the firm said energy and financial stocks may not provide the same defensive benefits they once did.

Recent strength in energy shares has been driven less by insulation from AI-industry risk than by price gains tied to commodity supply shocks.

If supply shocks ease and Treasury yields fall, the relative appeal of energy and financial stocks could weaken.

6. Trump and Vance Cancel Campaign Stops Ahead of U.S. Midterms

President Donald Trump and Vice President JD Vance have canceled some in-person campaign events ahead of the Nov. 3 midterm elections.

Trump canceled rallies that had been scheduled in Kansas on Oct. 31 and Iowa on Nov. 1, CNBC reported.

The events were part of a plan for rallies in 35 locations nationwide aimed at boosting turnout among Republican voters.

Vance also canceled some campaign stops. Specific reasons for the changes were not disclosed.

Trump plans to focus on tele-rallies, speaking to voters by phone instead of making in-person visits.

The Republican National Committee said Trump plans to hold phone rallies for voters in at least 19 states during the final 72 hours before the election.

Phone rallies allow candidates to deliver a message to voters in multiple regions in a short period.

It has not been confirmed whether the schedule changes are directly related to any shift in the state of the race.

7. Wall Street Sees Democrats Retaking House, With 96% of Investors Expecting It

As the U.S. midterm elections approach, more Wall Street investors are positioning for Democrats to retake the House of Representatives.

CNBC reported on Oct. 30 that investors are preparing for a shift in congressional power as Democratic polling improves and Trump’s approval rating remains low.

In a survey of 138 investors released by Wolfe Research on Oct. 27, 96% said they expect Democrats to win back the House majority.

For the Senate, 58% expected Democrats to retake control, while 42% said Republicans would keep their majority.

Wolfe Research’s own analysis was more cautious. It put the probability of a Democratic Senate takeover at 49%.

TD Securities said its base-case scenario is a so-called blue wave in which Democrats win both chambers.

Even if Democrats secure control of Congress, policy changes could be limited as long as Trump remains in the White House.

In divided government, legislation can be delayed and the president can still use veto power.

Piper Sandler estimated that if Democrats’ major policy proposals were all enacted, the U.S. fiscal deficit could increase by about $5 trillion over the next decade.

That calculation reflects the repeal of tariffs and the restoration of cuts to Medicaid, nutrition assistance for low-income households and Obamacare subsidies. There remains substantial uncertainty over whether those policies would actually be enacted.

A change in the Senate majority could also affect appointments at the Federal Reserve. Key officials, including Fed governors, are nominated by the president but must be confirmed by the Senate.

TD Securities said a Democratic-controlled Senate could make it harder to confirm candidates seen as disrespecting the Fed’s independence.

Another risk on Wall Street’s radar is the 2027 debt-ceiling standoff.

The Bipartisan Policy Center said the so-called X-date, when the U.S. Treasury could run out of cash, may arrive between late winter and midsummer of 2027.

If Democrats win a congressional majority, they could demand concessions on health care and welfare spending in exchange for agreeing to raise the debt ceiling.

Raymond James said that if Republicans lose the election, they may choose to raise the debt ceiling before the new Congress is seated in January 2027.

Morgan Stanley said political gridlock could limit major legislation. Inflation, economic growth and corporate earnings, however, matter more to the broader stock market than the election outcome.

Park Shin-young, New York correspondent, Hankyung.com nyusos@hankyung.com