Wall Street prepares for a $3 trillion IPO gusher
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Some of the world's biggest startups — including two AI darlings — have signaled possible IPOs next year, blockbuster offerings that would mint some $3 trillion worth of new public companies.
Why it matters: These companies generate little or no profit yet carry towering valuations. An AI-obsessed market that's happy to overlook all that risks repeating the mistakes of the dot-com era.
State of play: Elon Musk's SpaceX has told its investors that it's planning to go public next year. (Musk confirmed Wednesday night an IPO will happen.)
- The company is seeking a $1.5 trillion valuation — the richest listing in history, per Bloomberg.
- Combined with other possible listings, Bloomberg estimates that as much as $2.9 trillion worth of private companies could go public next year.
- Other AI-linked "centicorns" — companies valued at $100-billion plus — are reportedly weighing listings, including Databricks and Anthropic.
- OpenAI has an implied valuation of over $500 billion, fueling speculation about a future stock listing, though it has attempted to tamp that down.
Zoom in: Why now?
- Markets are near all-time highs, and there's strong investor enthusiasm surrounding AI, space and crypto companies.
- "Feed the ducks while they're quacking," says Steve Sosnick, chief strategist at Interactive Brokers.
Friction point: Yet investors are also wary that a bubble may have already formed in the shares of existing AI companies, without having to contend with new, richly valued stocks joining the frenzy.
- And a whiff of weakness in the AI trade is enough to make investors skittish these days.
Case in point: Oracle, which has made an enormous bet on an AI data center buildout.
- Its shares tumbled 11% in late trading Wednesday after the company reported disappointing quarterly sales, while spending increased.
What they're saying: If "valuations get too ridiculous" we could get a "WeWork moment," notes Jay Ritter, director of the IPO initiative and emeritus professor at the University of Florida.
- WeWork was valued at $47 billion by SoftBank in 2019, when it was set to go public. But institutional investors decided the office-space coworking company was nowhere near that value. WeWork later filed for bankruptcy.
- Sky-high valuations aren't just a market concern — they test the limits of how much speculative hope investors are willing to underwrite in an era defined by AI, space ambition and cheap private capital.
Yes, but: Any potential IPO boom will have its winners and losers.
- "Some will underperform, and a few will turn out to be the next Nvidia or Alphabet," Ritter says.
- A wave of big companies coming to market wouldn't necessarily be a bad thing, as capital markets are "supposed to be about allowing ordinary investors to participate in the growth of corporate prosperity," says Sosnick.
💭 Thought bubble, from Pro Rata's Dan Primack: Bankers always say "next year" is the big year for IPOs.
- One year it just might come true.
The bottom line: "Great companies don't always mean great investments," Ritter says.
