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.