Invested $51 million three years ago, now worth $2-4 billion? Anthropic's stake skyrockets, Zoom's stock price surges

Video conferencing company Zoom Communications' investment in Claude AI model developer Anthropic in 2023 is becoming a market focus, with the book value of this early investment potentially rising to between $2 billion and $4 billion.

Zoom's stock price surged 9.8% on Monday to $94.22, marking the highest closing price since August 22, 2022. Baird equity research analyst William V. Power noted in a research report that while the market primarily focuses on Zoom's revenue growth and AI business opportunities, the potential profit growth from its $51 million investment in Anthropic should not be overlooked.

Anthropic's valuation is rapidly increasing. According to a report from The Wall Street Journal earlier this month, Anthropic, the developer of the Claude AI model, plans to conduct a new round of $10 billion private financing at a valuation of $350 billion. Based on this valuation, Zoom's stake would be worth between $2 billion and $4 billion.

The value of the Anthropic investment is becoming apparent, significantly boosting profits in the third quarter

Zoom made a strategic investment in Anthropic through its venture capital department in the first quarter of 2023. Although the company has never explicitly stated that the $51 million strategic investment reported that quarter was entirely directed towards Anthropic, Baird's research department believes that the investment amount disclosed that quarter was all directed towards Anthropic.

This investment has begun to reflect in Zoom's financial reports. The company reported strategic investment income of $406.1 million in the third quarter, with Baird's research department estimating that most, if not all, of this came from the book value appreciation of its stake in Anthropic.

With rumors of Anthropic's IPO plans, the potential returns from this investment have sparked market speculation. "A significant question is, how much more can Anthropic's value increase as it may seek an IPO," Power wrote in the research report.

Strategic investment brings synergy, AI business gains technical support

In addition to financial returns, the investment in Anthropic also provides Zoom with a strategic advantage in AI product development. Zoom is continuously building and commercializing AI tools to assist customers with tasks such as meeting minutes and summaries.

"Zoom has a strong R&D engine and has been exploring AI for years," Power pointed out, mentioning the company's partnership with Anthropic. "We see potential for the Zoom platform to add more AI features in the future."

This collaboration gives Zoom a differentiated advantage in the highly competitive enterprise communication market, directly benefiting from Anthropic's technological breakthroughs in generative AI.

Market ratings remain cautious, still a distance from pandemic peak

Despite the surprises from the Anthropic investment, analysts remain cautious about Zoom's stock price outlook. Among the 33 analysts surveyed by FactSet, 52% rated it as a buy or equivalent, with an average target price of $96.40 The buy rating ratio is lower than the average level of about 56% for S&P 500 constituent stocks.

Baird's research department maintains a "outperform" rating on Zoom stock, with a target price of $95. Despite a significant rise in stock price on Monday, Zoom's stock is still down about 83% from its all-time high reached during the pandemic in October 2020.

This company, which once thrived during the COVID-19 pandemic, is now seeking new growth momentum through AI transformation and strategic investments. Whether the strategic investment in Anthropic can help it regain its former glory remains to be seen by the market