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Pershing Square Capital CEO Bill Ackman is offering Anthropic one of the strongest endorsements an investor could give while stopping well short of committing capital. He calls the artificial intelligence company an extraordinary business story, but says its potential outcomes are too broad for his portfolio.

Speaking at Yahoo Finance Invest, the well known value investor framed the divide as a matter of predictability. Pershing Square wants businesses whose future performance can be assessed with a very high degree of confidence, and Ackman does not believe Anthropic currently clears that standard.

"We think of ourselves as very low-risk investors. We want to invest in businesses that we can predict with a very high degree of confidence," Ackman said.

His caution arrived alongside remarkable praise for the company’s rapid ascent. "I think Anthropic is perhaps the most amazing business story of this century in terms of from zero to where it is today — it's an absolutely remarkable story."

Ackman added another unqualified compliment: "An incredibly impressive story." Yet admiration alone does not answer the question that matters to Pershing Square, which is whether Anthropic can be valued with sufficient precision to justify an investment.

The central problem is not whether Anthropic has built a compelling business, according to Ackman. It is whether investors can confidently determine what that business is worth while several difficult variables remain unresolved.

"I think it's just a much more complicated question as to what that business is worth. It's very hard to nail that with any degree of precision," Ackman said.

He described a valuation range broad enough to keep Anthropic outside Pershing Square’s portfolio. "It could be worth a lot more, a lot less, depending upon a few variables that are difficult to predict. And that's why it doesn't fit into our portfolio."

Anthropic has set an initial public offering price range of $70 to $78 per share. That range targets a fully diluted valuation of approximately $1.4 trillion, placing a formidable price on the company before its scheduled public market debut.

The company is expected to begin trading on Thursday, Nov. 19. Anthropic plans to list on the Nasdaq under the ticker symbol ANT, giving public investors an opportunity to assess the same valuation questions that are keeping Ackman away.

The financial results show why Anthropic commands attention. In an amended S-1 filing, the company said third quarter sales climbed 1,127% to $17 billion, reflecting an enormous increase from the corresponding period.

Growth nevertheless slowed when measured quarter over quarter. Third quarter sales rose 47%, compared with a 144% growth rate during the second quarter and a 132% increase in the first quarter.

The results also revealed the steep cost accompanying that expansion. Anthropic lost $23.29 billion in the third quarter, a figure that leaves the company with substantial work ahead to sustain its lofty valuation in public markets.

Ackman suggested Anthropic may be approaching a meaningful threshold in its business. "I think Anthropic is on the cusp, or might even be at, a place in terms of its operating profitability, where it's real operating profitability," he said.

The more difficult issue, in Ackman’s view, is whether Anthropic can maintain its leading position. "I think the issue is if Anthropic doesn't stay in the lead position, then the real questions about the business model [emerge]."

Capital spending adds another layer of uncertainty to the investment case. "So the capex they have to spend is really real … So I would just say it's a much more complicated question," Ackman said.

That complexity ultimately separates Anthropic from the predictable companies Pershing Square favors. Ackman called it "a more speculative bet than buying, for example, Visa, a company we own," leaving investors with a striking verdict: an amazing business story can still be too uncertain to buy.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.