AI threatens to upend the market. Is this time different?

Sifting through financial headlines in the age of AI can be dizzying. Anthropic, an AI company whose chatbot, Claude has seen wide adoption, was considering going public at a potential $2 trillion valuation. In recent days, that has dropped to a still healthy $1.3 trillion as the headwinds facing rapid growth in the AI space have increased with citizen initiatives against data centers, a worsening environment for data center lending, and a midterm election that brings with it a greater will to regulate AI.

This certainly feels like an unusual market environment. But here’s the thing. It's not.

John Templeton, author of the book, 16 Rules for Investment Success, wrote "The investor who says, 'This time is different,' when in fact it's virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing."

While circumstances may change, sometimes dramatically, the economic forces that shape markets and the human behaviors that drive them stay remarkably stable throughout history.

The Initial Public Offering (IPO) of Anthropic could potentially value the company somewhere between $1.3 trillion and $1.4 trillion. In this range, Anthropic would rank among the most valuable companies in the United States.

To wit, this company could be more valuable than Walmart and Costco combined. And unlike the grocery giants, Anthropic isn’t doing much in revenue. Its last reported earnings were around $126 billion.

How is it that a company could be worth more than two of the nation's largest retailers while generating just 12% of their combined revenue? Of course, revenue isn't the same as profit, and the potential margins and growth rates of an AI company are substantially different from those of traditional retailers. Still, the comparison is striking.

This feels out of touch with reality.

This feels different.

But it's not.

As long as there have been companies pushing the technological boundaries, it's been difficult to accurately predict their future value.

Anthropic’s investors could assign an extraordinary value to its anticipated future earnings and it could end up being the right call. Because Anthropic does not have an established record, a conventional price-to-earnings (P/E) ratio isn't particularly useful. But under certain assumptions about its future profitability, its valuation could imply earnings multiples approaching or exceeding 250 times.

Sounds like a lot. But we've been here before.

Notable companies that have recently exceeded the 250 times multiplier for P/E include Amazon (both in 2013 and 2015), Tesla (2020 and 2025), and Palantir Technologies (2024). These companies have done ok.

And as it is now, so it was in the past. Some highly valued companies of yore include familiar names like General Electric (1929), RCA (1925–1929), IBM (1960s–1972), and McDonald's (1972). Going further back, railroad and automobile companies, including Northern Pacific Railway and General Motors, also attracted extraordinary investor enthusiasm during periods of technological and industrial transformation.

Is Anthropic on the leading edge of a new technology that justifies the massive valuation investors may place on the company? Maybe. No one can say for sure. But the market will ultimately sort it out through the process of price discovery.

The challenge with believing, in spite of what we know about history, that this time is different is that we're often trying to justify what we already want to believe, whether for or against a particular outcome.

The reality is less comforting. We don't know what happens next. We don't know whether today's AI companies will justify the extraordinary valuations investors are placing on them.

What we do know is that investors have confronted economic uncertainty, technological revolutions, and periods of extraordinary market volatility before. Some of those moments created enormous wealth. Others destroyed it.

The lesson isn't that history guarantees a particular outcome. It's that sound investment decisions shouldn't depend on our ability to predict the future. A diversified portfolio, an appropriate tolerance for risk, and the discipline to remain invested through periods of uncertainty have historically served investors far better than attempting to anticipate every economic development.

This time isn't different, even if it's not so familiar.

Note: This post was written by humans and not robots. We hope you enjoyed it.

Photo by Immo Wegmann on Unsplash