What Indian Investors Should Know About Investing in US IPOs Like Anthropic

Interest in US initial public offerings (IPOs) has grown globally, especially for companies involved in artificial intelligence and cutting-edge technology. Indian investors, in particular, often ask whether they can participate in these US IPOs and what steps are involved.

Ankita Pathak, Head of Global Investments at Ionic Asset, clarifies that Indian residents are allowed to invest in overseas securities under the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India’s Liberalised Remittance Scheme. This scheme permits resident individuals to remit up to US$250,000 per financial year for approved purposes, including purchasing foreign stocks.

However, gaining direct access to IPO shares may not be straightforward. Most allocations favor institutional investors, and retail investors’ participation can be limited depending on their country of residence. This means Indian retail investors might face challenges securing IPO allotments.

In an interview with ETMarkets NRI Talk, Pathak discussed the key factors Indian investors should understand before attempting to invest in US IPOs. She explained why retail allocations in these listings can be limited and highlighted how investing at the IPO stage differs from buying shares once they begin trading publicly.

Understanding IPO Delays and Their Implications

Anthropic, a notable AI company, recently postponed its IPO plans. Pathak emphasized that such delays are common and do not necessarily indicate problems. Companies may delay going public for various reasons, such as disagreement over valuation, failure to secure anchor investors, changed strategic priorities, or unfavorable market conditions.

She noted that postponements are usually a strategic choice rather than a sign of distress, especially if the company can continue to raise private capital at comparable or better valuations. The AI sector, supported by robust private funding, often sees this trend. A delay becomes concerning only if it coincides with declining growth, funding difficulties, or loss of strategic focus—none of which have been reported for Anthropic.

Another dimension to consider is the broader regulatory and public debate on AI safety. Companies like Anthropic and OpenAI have deferred listings partly due to ongoing concerns and increased scrutiny the public markets would bring. This sector-wide caution reflects the unique challenges in the AI industry’s current environment.

How Are AI Companies Valued?

Valuing AI firms is complex and varies across the sector. According to Pathak, current market prices incorporate expectations beyond the immediate future, reflecting medium to long-term growth potential. Slight adjustments in growth assumptions can greatly affect valuations, more than short-term earnings fluctuations.

AI companies span several categories, including semiconductor manufacturers, cloud infrastructure providers, and software developers. Each group is evaluated differently—hardware firms on order books and near-term earnings, cloud providers on demand durability, and software companies on market reach and pricing power. Investors’ differing views on growth longevity and market share contribute to the volatility seen in AI stocks.

Identifying Sustainable Winners in the AI Sector

When distinguishing true long-term winners from companies benefiting mainly from AI hype, Pathak advises focusing on which businesses maintain profits after the initial growth phase. In hardware, winners are those with established installed bases generating recurring revenue through servicing and upgrades beyond initial infrastructure builds.

For software firms, the key is whether AI integration enhances their products with unique features, better economics, and increased customer loyalty. Metrics like gross margin trends, pricing power, net retention, and proprietary data ownership help indicate a durable competitive advantage. Companies merely linked to AI might show revenue growth without improving margins or customer retention.

Lessons from High-Profile IPOs Like SpaceX

SpaceX’s IPO debut and subsequent price correction demonstrate the risks involved in investing in high-profile listings. Such offerings often reflect investor confidence in founders and vision as much as financials. Premium valuations at listing depend on continued strong execution; any missteps can lead to rapid share price declines.

These IPOs tend to be oversubscribed, meaning investors often receive fewer shares than requested and may buy additional shares in the market afterward. Limited free float causes share prices to be sensitive to demand changes, amplifying volatility.

For Indian investors considering US IPOs, it is important to understand these dynamics and the challenges of accessing shares at the offering stage. Careful evaluation of company fundamentals and market conditions can help in making informed investment decisions.

US IPOs, especially in AI and technology, represent a growing area of interest worldwide. Indian investors, equipped with knowledge of regulatory frameworks and market nuances, can better navigate opportunities and risks associated with these listings.