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Chapter 1: What is the main topic discussed in this episode?
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There's a race happening on Wall Street as AI giants rush to go public and collect the prize of passive funds. Anthropic has made the latest move to file on the heels of SpaceX, which has already set to stage the largest public offering in stock market history. And a huge uptake in home batteries here in Australia is reshaping the power industry.
Could battery-generated power help the nation to combat inflation? Welcome to ABC Business Daily.
I'm Carrington Clark. And I'm the ABC's Chief Business Correspondent, Ian Verinder.
Ian, so nice to see you. It's been two weeks away. In many ways, the world is exactly as I left it. There's still major disputes about when we're going to see the Strait of Hormuz opening. And there seems to be amazing optimism, particularly in the U.S., about the artificial intelligence revolution. and how much profit these companies are going to be making. Is there anything I missed?
No, and the incredible amount of money they're going to be spending as well, which seems to be driving Wall Street's incredible drive to just buy more of them. Wall Street just keeps hitting new records each day.
So we have woken up today to the news at Anthropic. This is the AI company behind the chatbot, It was started by some kind of disaffected former employees of OpenAI, the company behind ChatGPT.
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Chapter 2: What is the race happening on Wall Street regarding AI companies?
And if you're not really generating the profits that you need to, and bear in mind, Anthropic is a relatively new company, the obvious way to go is to list on the stock exchange. We used to call it float, a float on the stock exchange back in the old days, but it's now called an IPO, an initial public offering.
But essentially, it's a way to sell your company to the public and for them to provide cash for that company. Now, one of the, I guess, key questions in all of this is where does the money go?
So a lot of the times you'll have an established private company that is a big money spinner and the founders just want to get out, you know, and you've seen a big chemist in Australia float not so long ago, a chemist warehouse. And that was essentially the owners there were trying to sell that operation to a major player for many years, couldn't get the price they wanted.
They went to the public market and they sold that way. So it was a way for them to cash out. for them to take money off the table and walk away. So that's one... Rationale. Yeah, for doing it. The other one is that you need money to pour into the business. And so you're getting investors from outside to pour money into the business rather than into your own pocket.
Sometimes, I remember with Elon Musk, there was a period where he kept suggesting he was going to take Tesla private again because he seemed to be irritated by all the scrutiny that you receive as a public company. This is kind of one of the drawbacks of actually being listed is that there are supposed to be stricter rules on the way that these companies operate.
But usually, well, at least the companies decide to go public. The reason they do it is because they can get better access to money.
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Chapter 3: How is battery technology impacting the Australian power industry?
particularly at a time when we have so much passive investment. And when you're on that index, you get a huge amount of investment in your company just because of your size. And these companies are going to be immediately massive players on the stock market. So we've got a situation now in 2026 with three potentially trillion dollar plus launches on the US stock market.
Chapter 4: Can battery-generated power help combat inflation in Australia?
SpaceX is expected to go public this month. This is the Elon Musk backed enterprise. The SpaceX refers to its space exploration, but that's only one part of the business. That part is linked directly to his satellite system that allows high-speed internet, Starlink, which is actually where most of the profit is currently coming from. But they're really trying to market this as an AI play as well.
He's got Grok attached to X, what was formerly known as Twitter. I mean, it's a complicated mess of a company. But Elon Musk is definitely trying to argue that this is one of the direct competitors with OpenAI, with Anthropic, and is vying to be one of the major players. to control the transformation into our AI. It'll be launching in the next couple of weeks, it looks like.
Is there a race going on to get there? And why might there be a race between these big three players to be the first to get to market?
Well, if you're the first to get to market, you're the first one to take the money. And look, there's an important distinction here. When you float on the stock exchange or you launch your IPO, the money comes in. Now, let's say they raise a trillion dollars and then the share price goes up. But when the share price goes up, that's not extra money flowing into the company directly.
That's the people who own it, the shareholders who own it. That's the value of their shares rising. And when the value of the shares rise, it obviously makes it easier for the company to raise cash elsewhere, either from banks or from lenders, wherever. But the initial public offering itself is where the grub state comes from.
So that trillion dollars goes into the company, it goes into investment, into the founders' pockets, wherever it goes. And then after that, once the share price rises, because the company is more valuable, it makes it easier to raise debt. And because you have a debt to equity ratio often.
So if your company is worth, say, a trillion and then the value of it goes to two trillion, you can raise a lot more debt elsewhere.
Yeah. And so at the moment when we've been talking about the valuations of these privately held companies, it's been based on the different funding rounds they've gone through, which is given that they say they've raised a certain amount of money at X valuation.
It's less transparent than once you're on the stock market where you can very clearly see how much is a share worth, how many shares are held by individuals and therefore what is the value of this enterprise.
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Chapter 5: How is Anthropic positioned in the AI public offering landscape?
And they've been funding their development out of So out of profits, whereas back then during the dot-com boom, you had a whole lot of companies essentially listing on the stock market, raising cash, burning through that cash, then raising more and more and more, all on the promise that they were going to make vast profits down the track.
Now, this, again, is all based on making huge amounts of money out of AI down the track, and the valuations are... essentially baked in that we're going to make a lot of money here, but not everyone is going to be a winner in this race. And that's something that I think everybody needs to be wary of. If you're putting your money into a company that has a huge
cash generation engine there in the background that's partially funding this, you're probably on safer ground than going directly into an organization that really doesn't earn a lot of money at the moment, but it's just all promising blue sky down the track.
So we've been talking in the last few years about the Magnificent Seven. These are the big mega cap companies that have driven so much of the growth in the stock market. I guess if we add these three that are expected to launch this year. We've got some sort of 10. What's our adjective for the 10? We'll work on that by the end of this program.
But it is so concentrated where we've seen this growth recently and also the the mingling of them is also quite extraordinary. And I was looking at the update from Anthropic in its most recent funding round where it was talking about the different companies it was paying, including Alphabet and other companies in that magnificent seven.
There is so much cross-pollination within this industry at the moment. Does that lower the risk or heighten the risk of this all coming a cropper?
It really, I think, heightens the risk because you've got, as you say, cross-pollination. You've got one company agreeing to spend a vast amount of money on another company's engineering or chips or in exchange for that company then taking the services from the company. It's really interlinked in such a complex way.
And really just think back to, I guess, the global financial crisis where you had financial institutions that were incredibly interlinked with their lending and the money transfers between them. And of course, when things started to turn pear-shaped, nobody quite knew exactly how exposed one bank was to another bank.
And so as a result, everybody just headed for the hills and wouldn't invest in banks. Banks wouldn't lend to one another. because they didn't know how exposed other institutions were to this property market collapse in America. So when you do have such a tightly interlinked model such as this, things can go wrong.
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Chapter 6: Why are AI companies rushing to go public in 2026?
The problem is, So you invest on Wall Street and you invest in, say, somewhere in Asia. You're investing only in a handful of companies because these companies now dominate Wall Street to such an extent that when you put your money into Wall Street, because a lot of the trading is now computerized, in fact, it's artificial intelligence that's running your investments.
You know, there's what's known as exchange traded funds, and it's all essentially run by a computer. So in Australia, for instance, if you don't know what to invest in, you can just buy a a unit in these exchange traded funds and you just get access to Australian stock exchange.
But what you do is your money is invested into the biggest companies, starting with the biggest and going down the list down to the 200th biggest company. So your money will be in the Commonwealth Bank and BHP overwhelmingly, and then it goes down the list. If you translate that over to America, you've got basically all your money
that you've invested on Wall Street, locked up in a handful of companies. You go to Korea, all locked up in a handful of companies. Taiwan, a couple of chip makers. So everything is becoming incredibly concentrated. And the danger there is that if this AI investment boom unwinds, then everybody is going to feel the pain.
One of the other things that these companies need, besides cash, is huge amounts of electricity. You did an article this week talking about how batteries have transformed the electricity market here in Australia for the better, in that they have actually led to lower prices of when it comes to what people are paying at home, but also what businesses are paying.
Take us through how transformative the subsidy from the government for batteries has been, and has it finally proven whether or not renewables can be cheaper to fossil fuels when it comes to generating electricity? Well, there's no doubt that
that renewables are much cheaper than fossil fuels. I mean, your fuel is free. It comes from the sun. Whereas a coal-fired generator, you've got to build this massive steam engine, essentially. You've got to dig up the coal. You've got to burn it through. There's a cost that isn't calculated, which is the cost of the damage to the environment.
Whereas with renewables, a lot of those costs are just not there. It's much cheaper to build solar farms than it is to build a coal generator. And much, much cheaper than nuclear power. So there's no doubt that it's cheaper. But what's happened...
I guess in Australia, we're in a very unique position here where we're kind of at ground zero in this whole ideological battle over climate change and electricity generation because Australians have taken to solar power like no other country in the world. Now, you know, something like one in three, one in four households, around about four million households have solar panels on the roof.
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Chapter 7: What challenges do companies face when transitioning from private to public?
How long is it going to take you to recoup the cost? Doesn't, nah, it's too expensive. So the government's idea to put this 30% subsidy on batteries happened to coincide with a dramatic collapse in the price of batteries as well. So battery prices have actually dropped by 99% since the 1990s. And the price is still falling. Because of scale, they're all being made in China.
And because there's being less mineral input used, they're becoming more efficient in the way they use the minerals to actually make the batteries. So the price of batteries is falling. And as a result, we've seen an overwhelming response from Australian households to install these batteries.
And that's had a huge impact on the way electricity is not just generated here, but distributed through the system. And so one of the big problems we've had with solar power, rooftop solar power, is that in the middle of the day, you get this enormous amount of electricity flooding back into the grid, which then would crash the price of electricity, sometimes to below zero.
which would then make the coal-fired generators, which can't just switch off. They're operating at a loss. And then at nighttime, there'd be a shortage of power. And the way that we got around that was to have gas basically coming into the system with gas-fired generators.
And we talked about gas being this important transitional system. as we move from existing fossil fuel, big coal-powered plants to renewables. And the story had been, up until quite recently, that this would be a prolonged period of gas being critical to that transition, which doesn't seem to be playing out.
The reason gas is so critical is because you can press a button and it goes on. You can press a button and it goes off. It is immediate. Unlike coal... which can't be turned on or off. It takes months to do both of those processes. So gas filled that breach. If you get a sudden drop off in power at nighttime, you press the gas generator, on it goes, problem solved.
What's been happening though now in the past 12 months is that the sudden increase in the amount of battery space we've got, both grid scale and household batteries, means that households are storing the energy rather than sending it back into the system during the day. Yeah. you can now have what's known as a virtual power plant in your home.
You hook up with a provider and they will sell power into the system when prices are very high. And that's generally at nighttime when you don't have a lot of renewable generation. So we're evening out the whole distribution. So instead of it all going into the system in one hit, it's going out over the course of the 24 hours. And AEMA, which is the Australian Energy Market Operator,
put out a report a few weeks ago, which basically showed that gas no longer is the price setter for electricity. And why is that important? Because gas has been extraordinarily expensive because we've had a couple of big export companies essentially denuding the local market of supply. And so gas prices here have been hugely expensive.
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