Tech & AI
Blackstone warns Anthropic may get a junk credit rating after listing
Blackstone has told investors in an Anthropic chip financing deal that the AI developer may start life as a listed company with a junk credit rating. That could make its borrowing costlier.
Quick Read
- Blackstone has warned investors that Anthropic may get a junk credit rating after it lists, according to reports.
- A junk rating could raise Anthropic's borrowing costs as it pays for chips.
- Technology shares fell sharply on Friday, with Broadcom down 5.5%.
- Blackstone's view is an expectation; only rating agencies assign credit grades.
What did Blackstone tell investors?
Blackstone, the investment firm, has warned investors that Anthropic may receive a junk credit rating after it lists its shares, according to reports. Anthropic is the artificial intelligence startup behind the Claude chatbot.
Why it matters: The warning reportedly went to investors in a large deal that pays for Anthropic's computer chips. Reports describe it as a change from Blackstone's earlier view.
What is a junk rating, and why does it matter?
Credit rating agencies grade how likely a borrower is to repay its debts. Borrowers rated investment grade are seen as safer and usually pay lower interest.
A rating below that line is often called junk. Lenders typically ask such borrowers for more interest to cover the extra risk. Some funds are limited to investment-grade debt, which may shrink the pool of willing lenders.
For Anthropic, a junk rating could raise the cost of the money it borrows to buy chips. The company is preparing an IPO, its debut sale of shares to the public.
How did chip and tech stocks trade?
Technology shares fell sharply on Friday, Oct. 30. The technology sector fund tumbled 4.9%, and the Nasdaq-100 fell 3.5%.
Broadcom (Nasdaq: AVGO), a chipmaker, tumbled 5.5% and closed at $326.08. The company lost $90 billion in market value. Its shares now sit 32.3% below their 52-week high, the top price of the past year.
What could come next?
What’s next: Blackstone's comments are an expectation, not a rating. Only the rating agencies assign grades, and an early grade could change as a company's finances develop.
The Federal Reserve releases a survey of bank loan officers on Monday, Nov. 2. It may show whether banks are tightening lending standards for businesses.
For readers
What it could mean for you: People who own a technology or semiconductor fund may feel this story most. AI developers buy large numbers of chips, and Anthropic is paying for some of its chips through a financing deal. If lenders charge Anthropic more, its chip purchases could cost more, and that might slow its spending. A tech fund holds many chip and software makers, so shifts in AI spending could reach it more than a broad index fund. A clearer picture may come once Anthropic's rating and listing plans are settled.
Questions and answers
Why might Anthropic get a junk credit rating?
Blackstone has told investors in Anthropic's chip financing deal that the startup may struggle to win an investment-grade rating after listing, according to reports. The reports do not say a rating agency has issued a grade.
What would a junk rating mean for Anthropic?
Borrowers rated below investment grade usually pay more interest. Anthropic could face higher costs on the money it borrows to buy chips, and fewer lenders may be willing to take part.
Is Anthropic planning to go public?
Reports describe a planned IPO, meaning a debut sale of shares to the public. Blackstone's warning concerns the company's credit standing after that listing.
The numbers
| Broadcom (AVGO) price | $326.08 |
|---|---|
| Broadcom (AVGO) change | −5.48% |
| Broadcom (AVGO) market value | $1.6 trillion |
| Broadcom (AVGO) 52-week high | $481.57 |
| S&P 500 change | −1.82% |
| 10-year Treasury yield | 4.94% |
Friday’s close
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Not investment advice.
