Anthropic Listing Could Boost Wall Street Bank Earnings

Impact On Investment Banking

Wall Street bank stocks have experienced a decline in momentum following a strong start to the summer. Rising interest rates are currently threatening the investment banking and trading booms that previously drove significant earnings growth. Despite reporting sturdy results in early October, there are increasing signs of a slowdown in trading activity and overall deal volume. A Federal Reserve survey released recently found that US banks broadly tightened standards in the third quarter compared to the second quarter, reversing a four-quarter trend of easing standards. Furthermore, borrowing demand has weakened across most loan categories, adding pressure to the financial sector.

In this environment, the highly anticipated public debut of Anthropic, which could occur as early as November 16, has become a focal point for the industry. According to the startup’s S-1 filing, each of the five largest banks on Wall Street has secured a mandate to assist with the planned November listing. This high-profile event is seen as a potential catalyst for banking revenues during a period of market uncertainty and declining global activity.

Financial Projections And Bank Performance

Calculations from Evercore suggest that the listing could provide an average boost of approximately 0.8% to the fourth-quarter earnings of these banks. This estimate is based on fees earned from previous high-profile listings, such as the SpaceX IPO in June. Among the participating institutions, Citigroup, Morgan Stanley, and Goldman Sachs are expected to see the most significant financial lifts. Analysts suggest that this specific event could act as a deciding factor for the final quarter of the year for these banking giants.

Recent market data shows that investors are becoming more selective regarding bank stocks. From early October through November 2, JPMorgan saw a 3% increase, while Goldman Sachs remained flat and Morgan Stanley declined by 1.2%. More significant drops were noted for Bank of America and Citigroup, which fell by 9% and 5%, respectively. This trend coincides with a broader decline in worldwide investment banking activity, which fell 25% year-over-year in October, while US stock trading volumes dropped by 8%.

AI Market Sentiment And Valuation

There is growing skepticism on Wall Street regarding the AI investment boom that has fueled many of the trading and dealmaking fees banks earned this year. Investors are currently rethinking the valuations they are willing to accept for the largest AI firms. Recent reports indicate that investors have suggested a valuation for Anthropic between $1.5 trillion and $1.6 trillion, a notable decrease from the $2 trillion figure reported earlier this year. This shift reflects a broader reassessment of how much capital is appropriate for the world’s biggest AI companies.

Despite these valuation adjustments, leadership at major banks remains optimistic. Goldman Sachs CEO David Solomon noted that companies with strong narratives and reasonable valuations can still find ample capital. Similarly, Morgan Stanley CEO Ted Pick suggested that the AI infrastructure investment cycle is still in its early stages, comparing the current progress to the second inning of a nine-inning game, implying that enormous investments are still expected in the sector.

Regulatory Risks And Transparency

Anthropic’s IPO filing has also drawn attention for its unprecedented level of transparency regarding risk. The prospectus includes over 90 pages dedicated to potential dangers, warning that advanced AI systems could pose existential risks to humanity or be misused for cyberattacks, domestic surveillance, and the development of biological and chemical weapons. While such disclosures are unusual for a public offering, some analysts view this transparency as a positive sign of management’s commitment to safety and accountability, even if it may intensify regulatory scrutiny.

Beyond the AI sector, banking professionals are monitoring broader economic and political indicators. There is a belief that capital markets activity could accelerate following upcoming election results, as the market anticipates the future business environment for dealmaking. The combination of these political factors and the Anthropic listing will likely shape the trajectory of investment banking through the end of the year.