Anthropic is hitting turbulence at a critical moment, with a cascade of challenges converging ahead of a potential IPO that could value the company near $800 billion.

Why it matters: The AI darling, whose revenue has tripled to $30 billion this year on the back of its wildly popular coding tools, has never been more valuable or more vulnerable.

• Chief rival OpenAI senses opportunity in the Claude maker's recent stumbles, courting frustrated developers and pitching itself as the steadier alternative ahead of dueling IPOs.

Zoom in: Anthropic's problems over the past two months span nearly every part of its business — product quality, pricing, security and capacity — and are starting to compound.

1. Model backlash: Perceived declines in Opus 4.6 performance triggered an initial wave of suspicion, with some developers accusing Anthropic of quietly downgrading its flagship model.

• Its newest model, Opus 4.7, delivered major benchmark gains but drew a mixed public reception, as some users complained of higher token costs, bugs and uneven performance.

2. Capacity crunch: Surging demand is straining Anthropic's compute, with users running into tighter limits and periodic outages — a red flag for companies that have grown reliant on Claude.

3. Security scares: A software update accidentally exposed internal Claude Code files, handing outsiders a window into Anthropic's most valuable product and raising questions about its internal safeguards.

• Anthropic is now investigating reports that a small group of unauthorized users accessed Mythos — its most powerful model, withheld over safety concerns about its offensive cyber capabilities.

4. Product confusion: Some users discovered on Tuesday that Claude Code was no longer available on the $20/month Pro plan — a potentially major shift affecting Anthropic's most popular product and its most accessible tier.

• Facing massive backlash, the company said the move was part of a limited test affecting a small share of users, though that explanation did little to ease fears of broader pricing changes.

Reality check: Anthropic's business is still booming.

• Even as the company pushes enterprise clients toward usage-based pricing, demand hasn't slowed — nor has revenue.
• Anthropic's standoff with the Pentagon endeared it to AI safety advocates and Trump critics, helping drive a spike in usage that briefly sent Claude to the top of the U.S. App Store.
• "We've seen extraordinary demand for Claude over the past several months, and our team is doing everything we can to scale quickly and responsibly," an Anthropic spokesperson told Axios. "We know it hasn't always been smooth, and we're grateful to our community for the patience and feedback as we work through it."

The big picture: The stakes go far beyond a few product missteps. Anthropic and OpenAI are locked in a race to define the enterprise AI market and to convince investors they deserve massive IPO valuations.

• Anthropic's rapid rise has been fueled by cutting-edge products, developer trust and a reputation for discipline. Now, even small stumbles risk chipping away at that foundation.

What we're watching: OpenAI, no stranger to "code red" moments in the breakneck AI race, is seizing on its competitor's growing pains.

• A leaked memo from OpenAI chief revenue officer Denise Dresser blasted Anthropic as elitist and alleged that the company had overstated its revenue run rate by billions.
• CEO Sam Altman accused Anthropic of "fear-based marketing" in a podcast appearance this week, taking aim at its tightly controlled Mythos rollout.
• And as Anthropic grappled with user backlash from its Claude Code pricing confusion, OpenAI engineers — egged on by Altman — openly mocked their rival on social media.

The bottom line: Both Altman and Anthropic CEO Dario Amodei used to signal that the AI race should have multiple winners. Their tone and tactics now suggest otherwise.

Get on the AI train or get left behind. That messaging from frontier labs about the world-changing nature of AI suggests they're not focused on addressing consumer backlash to the technology.

Why it matters: They may regret that approach when they go public and have to work overtime to turn AI haters into customers.

What they're saying: "Tech people have never been great communicators," Paul Argenti, corporate reputation expert and Dartmouth College professor, tells Axios.

• "The first company that actually understands the power of corporate communication and shaping messaging for their product is going to win," he added, recalling Google's early ads showing a father messaging his daughter.
• He says Google and Microsoft have a leg up over frontier labs because they have "more savvy" communications strategies.

State of play: Consumers are increasingly skeptical about AI, but that doesn't seem to be changing the messaging from AI CEOs.

• Half of Americans are more concerned than excited about the use of AI, according to Pew, and Gen Z's excitement about the technology sits at 22%, according to Gallup.
• Anthropic's Dario Amodei recently reiterated his concern about AI causing a "serious employment crisis" right after his company unveiled a model so powerful it only gave access to a few select partners.
• OpenAI CEO Sam Altman called this "fear-based marketing," adding that the doomerism hasn't helped.

Keep reading.

Clara Shih, a former top AI executive at both Salesforce and Meta, is launching a new foundation that aims to provide the next generation of workers tools to navigate the uncertain job market.

Why it matters: College students and younger workers are increasingly stressed that AI is eroding entry-level jobs.

Driving the news: The New Work Foundation is debuting with three tools:

• JobClaw maps one's strengths and interests to a role for which they are well suited. It's starting out as an open-source prototype on GitHub, with plans for a consumer release.
• dear [CC] is designed as a modern twist on Dear Abby, aiming to offer much-needed career advice, detailing how AI is affecting each profession.
• Field Report is designed to help recent college graduates identify the best jobs for their major.

Read more.

• Anthropic says it has no way to control or shut down its AI models once they're deployed by the Pentagon, according to a new court filing. (Axios)
• OpenAI has been briefing federal agencies, state governments and Five Eyes allies on the capabilities of its new cyber product over the past week. (Axios)
• Tesla reported an uptick in quarterly revenue and profit, but the costs of pivoting to an AI future are starting to add up. (Axios)

I made this with a single prompt using ChatGPT's new image editor — and that's a working QR code that goes to the Axios AI+ homepage.

• And, if you are looking for more tech nostalgia, try entering "DVD Screensaver" on Google's homepage.