If Anthropic's IPO goes smoothly and the stock price rises next week, then everything remains the same for AI. Otherwise, some companies will go bankrupt.

The valuations of artificial intelligence (AI) startups are facing a reality check. Moves by leading players OpenAI and Anthropic to lower their valuation expectations have heightened concerns among venture capitalists over a broad correction in startup valuations. This has positioned Anthropic’s upcoming initial public offering (IPO) as a critical moment that could shape the trajectory of the entire AI sector.

According to a Bloomberg report on November 12, sources revealed that OpenAI, facing a deteriorating market environment and feedback from investors, reduced its target valuation from $1.4 trillion to $1.25 trillion, and cut its fundraising goal by one-third. At the same time, competitor Anthropic has decided to pursue its IPO at a fully diluted valuation below the expected $1.4 trillion, a figure much lower than the $2 trillion anticipated by some bankers earlier.

These scaled-back deals have dealt a significant blow to the already unsettled venture capital sector, which has been rattled by several consecutive weeks of sell-offs in publicly traded AI stocks. Jai Das, President and Partner at Sapphire Ventures, warned that Anthropic’s listing next week is almost akin to “the ecosystem going public.” If the IPO goes smoothly and the stock price steadily rises, “AI deals will proceed as usual”; but if the performance is poor, “some companies will go under.”

This wave of developments is pressing venture capital firms to rapidly adjust their strategies. Investors have started employing more conservative revenue multiples during fundraising negotiations and are encouraging startups to accept lower valuations and prioritize cash reserves. This marks a stark contrast to the earlier frenzy of capital chasing zero-revenue AI startups earlier this year.

Valuation Cuts by Giants Trigger Market Shockwaves

In late September, OpenAI launched a new round of fundraising negotiations with great confidence. According to Bloomberg, sources said the company initially pitched terms to potential investors to raise at least $30 billion in fresh capital at a $1.4 trillion valuation. However, for a high-profile startup whose previous valuation had already reached $852 billion, some investors deemed these terms too aggressive. In response to feedback, OpenAI ultimately chose to compromise. OpenAI subsequently lowered its target valuation to $1.25 trillion and trimmed its fundraising goal by about a third.

OpenAI’s reduced fundraising effort, combined with Anthropic’s decision to lower its IPO valuation, has triggered a chain reaction. Bloomberg Intelligence reported in October that the development trajectories of these two industry giants are expected to account for over one-third of total global startup investments. With complex deal networks spanning technology, chip makers, and cloud service partners, they define and drive today’s AI boom. Any tightening in capital access or dimming valuation prospects for these two firms is bound to ripple throughout the entire AI field.

Valuation Logic Tightens; Investors Hit the Brakes

The experiences of these two giants have already sparked a chain reaction in the venture capital community. Tomasz Tunguz, General Partner at Theory Ventures, noted that in just the past two weeks, he has observed investors adopting more conservative revenue multiples in AI startup fundraising discussions.

Howard Morgan, Co-Founder and General Partner at B Capital, also said he is advising several startups to lower their target fundraising valuations, citing recent developments at OpenAI and Anthropic as the main drivers.

“We’re seeing this across multiple AI companies we’re evaluating. They used to expect high single-digit or even double-digit billion-dollar valuations,” Morgan said. “Now we’re telling them, ‘No, given your current revenue, these valuations are too high’—and in some cases, these companies’ revenues are still zero or very slim.”

This shift is significant. Previously, throughout the year, venture investors aggressively sent unsolicited term sheets to promising founders and poured large sums into businesses with unproven models and scant revenue. Some startups even completed new, higher-valuation funding rounds just days after closing their previous rounds.

In recent weeks, the venture capital world has been hit by a series of new risks: large-scale sell-offs in AI stocks; resurgent expectations of rising interest rates; a major backer in the AI sector, Nvidia, caught up in scandal. In addition, the Democratic Party’s sweeping victories in the US midterm elections are expected to make it more difficult to build new data centers and secure the computing power required for AI services.

Because of this, any signal suggesting tighter capital access or declining valuation prospects for OpenAI or Anthropic could spark a chain reaction across the entire AI industry.

Founders Advised to “Raise While You Can”; Cash Is King

Many startups contemplating IPOs or other transactions are now taking a wait-and-see approach until the outcome of Anthropic’s IPO becomes clear.

Amid the uncertainty, many early-stage venture capital firms have begun adjusting the advice they give founders. Eric Bahn, Partner at Hustle Fund, said the firm is advising founders “to secure as much funding as they can quickly, and to focus on conserving cash over the coming year.” Alexa von Tobel, Managing Partner at Inspired Capital, has also started urging their portfolio companies not to delay fundraising.

“The best founders are always alert to market conditions. When a major or moderate correction is foreseeable, cash is king.”