The Trigger of "Black Friday": Is Anthropic Only "Trash Level"?

Blackstone has informed investors that Anthropic may not receive an investment-grade rating immediately after its IPO, expecting that major rating agencies will issue it a “higher-level” junk rating.

According to the Financial Times, citing informed sources, Blackstone delivered this information to investors in Anthropic’s latest $63 billion chip financing deal. Should the rating fall into junk territory, Anthropic’s prospects for financing the over $800 billion computational power plan will become more complicated.

American financial blogger and YouTube channel Meet Kevin host Kevin Paffrath believes that this news was the trigger for Friday's accelerated U.S. stock market decline: "The moment the news was released, the market plunged further."

In his view, the crux of the issue is that Anthropic’s commitment to computational power requires over a decade of profits to cover, yet the company cannot secure an investment-grade rating.

On that day, the earnings reports from Amazon and Intel had already heightened concerns about the sustainability of the AI boom, and U.S. equities had dropped sharply even before the news was released. After publication, U.S. tech stocks plunged further to the day's lows, with the Nasdaq 100 index closing down 3.5%.

Investment-Grade Expectations Missed

Insiders revealed that over the past few months, Blackstone had told investment partners it expected Anthropic to obtain an investment-grade rating by year's end. However, based on guidance from major rating agencies, Blackstone recently revised its message, saying it is more likely that Anthropic will receive a BB-range or higher rating.

According to S&P and Fitch's rating systems, BBB- and above are considered investment-grade, BB+ and below are speculative-grade, which the market commonly refers to as "junk." The BB band (BB+, BB, BB-) is the highest level within junk ratings, just below the investment-grade threshold. This is what is meant by a "higher-level" junk rating.

This rating is crucial for Anthropic. The company filed for an IPO on Monday, which could become the largest IPO ever next month. The prospectus outlined a "bold but sane" plan: to invest over $800 billion in computational infrastructure from now until 2045.

Currently, Anthropic holds more than $112 billion in cash and equivalents, and investors expect the IPO to raise about another $100 billion.

An investment-grade rating enables Anthropic to borrow at lower interest rates for these projects. Furthermore, many insurance companies and pension funds are required to invest mainly in investment-grade assets, or have restrictions on the amount of junk debt they can hold. If the rating falls to BB+ or below, the funding pool accessible to the company will narrow significantly and rates will rise.

“The key is whether credit can be obtained, which is very important... If (Anthropic) isn’t investment-grade, credit costs go up, and that's not good for anyone,” said a U.S. tech-focused fund manager. Regarding the day's market selloff, he commented: “It was an absolute bloodbath out there.”

Bankers for both Anthropic and its competitor OpenAI are lobbying the largest rating agencies, seeking investment-grade ratings once the two AI companies go public. The three major agencies most influential on corporate borrowing costs—Fitch, Moody’s, and S&P—have so far not formally issued any credit rating to Anthropic.

Strong Balance Sheet, Heavy Commitments

In Kevin Paffrath’s view, Anthropic’s problem does not lie in its balance sheet.

According to his analysis, Anthropic holds about $112 billion in cash and $19 billion in short-term investments, totaling approximately $131 billion, with current liabilities of only about $7 billion; operating cash flow has turned positive, and free cash flow for the first half of the year was about $3.5 billion. If the IPO raises another $100 billion, available funds would reach about $231 billion.

The pressure comes from the scale of commitments.Paffrath estimates that after deducting these funds from the $800 billion commitment to computational power, about $569 billion will still need to be made up. Assuming Anthropic reaches an annualized revenue of $80 billion at year end, with a net margin of 40%, annual contribution would be around $32 billion, meaning it would take about 17 years to cover the shortfall.

“That’s equivalent to betting 17 years’ worth of profits on future computational commitments, and that’s what makes people nervous,” he said. "If you just got a junk rating, how can you achieve this? That’s what’s frustrating the market today."

Paffrath also made a comparison with SpaceX.He noted that SpaceX has received investment-grade ratings from all three major agencies, likely because its business doesn’t solely rely on AI, but also has rocket launches and Starlink.

Nevertheless, Paffrath himself remains bullish.He believes Anthropic’s revenue growth will surpass market expectations. As for concerns over supplier financing, he’s not worried, reasoning that Broadcom’s net margin is around 55%, so even if it “gives” chips to Anthropic, costs would be covered. He sees the current downturn as a buying opportunity.

“North Star”: Leveraging Broadcom’s Credit for Financing

The $63 billion financing is code-named “Project North Star,” and Wall Street banks completed the deal earlier this week. The funds will be used for Anthropic to lease Google’s 1.5 gigawatt chips. Blackstone serves as anchor investor and, in cooperation with funding banks, will resell the debt to other investors.

The deal’s structure reveals Anthropic’s reliance on supplier credit. Over $42 billion of the senior loans are guaranteed by Broadcom, which co-developed the chip batch and holds a top A-grade investment rating—an important factor enabling Anthropic to secure this funding. Institutional investors prefer senior debt, as it is repaid before subordinated loans in default events.

Another $18 billion in subordinated debt is backed by Anthropic’s lease payments, putting lenders in direct exposure to Anthropic’s credit risk. Previous media reports noted that Blackstone funds subscribed to $9 billion of this tranche at yields exceeding 10%.

This subordinated debt was rated BB+ (just one notch below investment grade) with a positive outlook by Kroll Bond Rating Agency (KBRA), a slight improvement over the stable outlook for the similar “Big Sky” deal four months ago; Morningstar DBRS assigned it a BB rating.

Anthropic, Blackstone, KBRA, Morningstar DBRS, and S&P all declined to comment, while Fitch and Moody’s did not respond to comment requests.