I'll admit it, I am not very well educated in the ways of finance but I am a bit baffled how Anthropic can be valued at (reportedly) upwards of 1 trillion but also have a "junk" rating?

A lot of people want to buy their stock because of their fame, but the company’s underlying financials are junk (way too many commitments, way too little revenue)

The problem is they don’t have a unique enough product to sell at so high margin. If they were the only AI good enough to use, then I’d be ok. But given that cheap Deepseek is always catching up their stock is useless

I’m also not an expert, at all.

Junk rating from a relatively high likelihood that they can’t pay the people they owe money to. If you buy their shares they are much more likely to go to zero than a more stable company in the near term. So you don’t want to buy anything Anthropic with money that you may need for anything.

High valuation because the public believe that if they do figure it out they could be worth hundreds of trillions. So a lot of people may want to buy it as a speculative bet of ungodly returns

Junk is just a terrible name in 2026.

Previous bubble villain Michael Milken and the 80s leveraged buyout bubble made it a name of common parlance because that bubble was built on "junk" bonds.

The old traders of that time who were against what Milken was doing called them "junk" and the name has stuck ever since.

It just means "risky". If you trade bonds it has no association with "bad". It is an inside bond market term, I think that is why it sticks too. It is a fun term if you trade bonds but terrible for communicating to the average person.

No, junk means something specific here, it's not just a vague term.

If you think it's terrible for communicating to the average person (and I am very much the average person) you could explain it yourself in detail.

So I will try:

You are right that it is a sort of consensus rating threshold maintained by the ratings agencies that means their (Anthropic's) debts are not considered investment-grade — that they are speculative, high risk, that they are considered likely not to be able to repay. It is ultimately the ratings' companies (and therefore some individual people's) decisions as to whether they are or are not junk-rated.

But for Anthropic it also means they will pay much more for their debt, they may not be able to negotiate long repayment terms, they may need to de-risk with underwriters by paying higher fees, they may be limited by the terms of any individual loan — it may limit how much future debt they are allowed to take on, may mean they need the lender's approval to restructure their business in even small ways, etc., and most importantly, some institutional investors (pension funds, mutuals, insurance companies, ETFs etc.) will be barred from investing (which drives why their debt will cost more).

Frankly I think it is baffling that Anthropic are still headed to an IPO when this is what it could look like on the other side.

Bond ratings are (supposed to be; see 2008 for failure case) based on actual, hard financial metrics. Stock valuations are that, plus fortune telling, plus feels, plus Jim Cramer hitting a big red button.

'junk rating' always means bonds, and it's the share price/market cap that's that high.

Very loosely a 'high' (price over earnings) share price is about growth and exciting prospects; high or well rated bond is about stability. (Not to suggest they move linearly in opposite directions though!)

They are different things, the valuation applies to their equity value (reported) but the junk rating is for its debt and how creditors asses the quality of the debt. If a company is burning tens of billions of dollars and is only "operationally" profitable, you would kind of have some doubts about their ability to repay. Those doubts can stand at odds with how the equity market sees the long-term potential of the company.

Would it not be extremely foolhardy for a new CEO to start slow rolling things considering the dominant position Nvidia currently finds itself in? Why would they do that? You say yourself it would clearly be a managed decline in that case. Why would an incoming CEO want that? Don't forget their pay would likely be performance related and probably not tied to decreasing the stock price

I’m pretty naive about this kind of thing, so bear with me, but if your stock is in free fall and you need a new CEO, isn’t there merit in a stabilizing force? No one is ever compensated just for, at least in the near term, stopping the bleeding?

Well the stock is high because shareholders have been predicting massive future growth. If a CEO is going to stabilize the price, that means they have to give investors confidence in the same or at at least similar growth trajectory. Which was aggressive.

Nice analogy but there’s just one problem: it assumes arriving at mars is the end goal. But that’s not how companies seem to operate. They’re about indefinite growth. Which clearly isn’t possible and ends up killing a lot of companies as they eat themselves from the inside just to keep greedy shareholders happy.

There used to be a time when people would invest over the course of decades and enjoy the dividends they received. But these days it’s all just about the short term rewards.

Tragedy of the stock market: infinity can hit a company even if both management and shareholders are fully committed to modest long term stability (apparently this is absolutely not what happened at nvidia).

A company can get into the sights of "infinity believers" even if they try not to. Infinityists will honestly believe that the stock is a very good buy and whenever a "stability lover" has to sell, they will outbid the next stabilityist. Price goes up, it becomes more visible to infinityists and so on. Eventually infinityist will outnumber stabilityist and management will enter "or die trying" mode on promises they never made. Or be replaced.

If they discover tricky shenanigans, they might well announce them publicly to cover their own personal position. At the start, they're not going to have too much invested.

Yes, you publicly announce everything now so you can throw it all at the feet of the ousted leader. If not, enough time will pass where blaming the ousted leader looks like excuses for the current one and just looks bad to the public. Look at the current US administration as an example of how the constant blaming of the previous administration played to the public opinion.

Right. One of the weird side effects of the Jensen Huang report hierarchy is that instead of a handful of direct reports that have stories they need to CYA on, there are over sixty of them! This could make the congressional testimony aspect pretty intense.

And each has plausible deniability of their personal involvement, since the responsibility is so diffuse below Huang.

That’s a good point. A new CEO never wants a slow unwinding, they go for quick pain to set the baseline of their bonus assessment into something workable.

The peak on the semiconductor ETFs was in spring. Even with the bounce semiconductors are 30% down from the peak.

OpenAI not being able to IPO I think is the huge indicator that we are in denial of.

The tide is starting to go out and we are starting to see who is swimming naked.

Jensen and the Jensenverse as the villain of the bubble is the prestige of this bubble's magic trick. That is a show stopper.

OpenaAI as Myspace I think is the second act, yet to come.