- ANTH.PVT
- NVDA
The highly anticipated Anthropic IPO could be one of the largest in history, with an expected valuation of between $1.5 billion and $2 billion.
The Anthropic hype train, however, was knocked off the tracks a bit when the company filed its registration documents on Oct. 26. While Anthropic posted strong revenue growth in the first half of the year, it revealed that the artificial intelligence (AI) company had a $693 million operating loss, an $80 billion net loss, and $518 billion in noncancellable debt over the next 10 years to build out data centers. It also has concentration risk, with two clients accounting for 20% of revenue.
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And after seeing Space Exploration Technologies flop after an initial IPO-hype surge, investors may be reluctant to follow the same pattern. Given some of the red flags, investors may want to wait a bit and see how things sort out before jumping into the Anthropic IPO.
There is a much better way to get access to a broad range of AI stocks, including Anthropic — the Invesco AI and Next Gen Software ETF (NYSEMKT: IGPT). This might be the best AI-focused exchange-traded fund (ETF) to own for the long term. Here’s why.
Up 53% year-to-date
Of all the AI-focused ETFs on the market, the Invesco AI and Next Gen Software ETF might be the best long-term option for a few reasons.
For starters, it has one of the best track records. The ETF is up 53% year-to-date and 57% over the past 12 months, which places it fourth in both categories among AI ETFs. It is fifth with a three-year average annualized return of 41% and sixth with a five-year average return of 14%.
But beyond performance, I like this ETF because it is less concentrated than most AI ETFs and includes international AI stocks. I think both of these factors have allowed it to outperform, and it will continue to do so, as AI’s utility will spread beyond the technology and beyond U.S. borders in the next phase of AI growth.
A diversified AI ETF
The ETF tracks the STOXX World AC NexGen Software Development Index, which comprises companies with significant exposure to technologies, including AI, that derive at least 50% of their revenue from future software development, among other criteria.
The fund includes companies of all cap sizes with a minimum market cap of 500 million euros, including stocks from both developed and emerging markets. The index is capped at 100 stocks that meet the criteria and is ranked by market cap. There are also caps to ensure no single stock accounts for more than 8% of the portfolio, and stocks with positions larger than 4.5% don’t exceed 45% of the portfolio. The fund is rebalanced four times a year.
