Scottish Mortgage (SMT) has invested £91m in Anthropic, the US artificial intelligence start-up whose $183bn (£137bn) valuation recently worried its former fund manager James Anderson.
Anderson, who left Baillie Gifford in 2022 after 40 years with SMT’s investment group, told the Financial Times earlier this month that the “scale of jump and the pace” with which Anthropic and its main rival OpenAI had increased in value “were disconcerting”.
The fund manager, who now works at Lingotto Investment Management, made his comments a month after Edinburgh-based Baillie Gifford took part in the series F financing led by venture capital from Iconiq, Lightspeed and Fidelity in which Anthropic raised $13bn.
The late-stage fund raising gave four-year-old Anthropic a “post-money” valuation of $183bn just six months after it raised $3.5bn at a $61.5bn value. Founded by seven former employees of OpenAI, Anthropic’s rise has been meteoric, valued at around $18bn when Amazon invested an initial $1.25bn in 2021 in partnership with the developer of a family of large language models named Claude.
OpenAI meanwhile has surged from $157bn to $500bn in a year as the race to produce super computers draws in record amounts of capital and provokes fears of a stock market bubble.
Unveiling the latest investment, Anthropic chief financial officer Krishna Rao said the firm was “seeing exponential growth in demand” from companies large and small. At the start of this year, its run-rate annualised revenue had grown to around $1bn. By August, this had reached to over $5bn, making Anthropic one of the fastest-growing technology companies ever, he said.
Investors who like Anderson feel bothered by this speculative rush can take some reassurance that Anthropic represented just 0.6% of Scottish Mortgage’s £15bn of total assets including borrowing at 31 August.
However, this is part of a larger push by fund managers Tom Slater and Lawrence Burns into AI with the duo also recently adding website design platform Figma while holding other leading players in the computing revolution in its top 10 such as TSMC, Amazon, Meta, Nvidia and ASML.
In a second quarter update, the Baillie Gifford flagship boasted that it owned half of the 10 most valuable “unicorns” or young private comanies over $1bn. These included SpaceX, Elon Musk’s rocket company, that is its largest holding at 7.6% of assets. It was valued at $350bn compared to the $31bn valuation when Scottish Mortgage first invested in December 2018.
OpenAI, then valued at $300bn, was not a holding. Speaking this month, Hamish Maxwell, investment specialist for the trust, said the fund managers preferred Anthropic as “one of the very few global teams capable of training the next-generation AI models”.
Maxwell said while “still early-stage”, Anthropic stood out for its “technical strength”, “growing commercial potential including coding” and “commitment to safety”, a reference to a decision in 2022 to hold back Claude for further testing while OpenAI rushed its ChatGPT to market.
Other investors in Anthropic’s latest round alongside Baillie Gifford included BackRock, Blackstone, Ontario Teachers’ Pension Plan, Qatar Investment Authority and T Rowe Price.
News of the investment comes as Scottish Mortgage continues to recover from the 2022 growth crash which occurred in the same year that Anderson, the architect of its conversion to technology investing, stepped down. From a peak of £15.28 peak in November 2021, it slumped to a low of 621p in May 2023. However, after a 32% rally in the past year the shares have recovered to £11.54. Demand remains weak though, with the trust standing on an 11% discount requiring the company to continue buying back large quantities of its stock.
