The AI IPO rush is here.
With OpenAI’s announcement late Monday that it had confidentially filed for an IPO, the three biggest AI companies are all in line to go public. (And a fourth, Perplexity, will likely bring up the rear in 2028.)
It’s something that has been looming for a long while on Wall Street. Now, though, investors will have to decide if the era of the Mega-IPOs is too much of a good thing.
SpaceX is asking Wall Street for about $75 billion. Anthropic and OpenAI may seek a bit less, but it still will almost certainly be well over the current all-time high (Alibaba set that in 2014, with a $22 billion raise). Perplexity, whose CEO told CNBC Monday that it was planning to IPO in 2028, is a wild card.
That’s a lot of money, regardless of whether it’s coming from institutional or retail investors. And it could add up to a make-or-break moment for both the industry and possibly the economy.
The bull case
The revenue growth at companies like OpenAI and Anthropic has been unlike anything investors have ever seen. SpaceX has built a solid business in the rocket field and is betting heavily that it can make xAI an even bigger part of its business. The company is actively developing a large-scale collection of AI data centers in space, which could help it achieve that goal, should it succeed. Investors might be willing to overlook losses of all of these companies now and bet instead on the potential of these companies.
If AI takes off like OpenAI CEO Sam Altman and other executives envision, some or all of these companies stand to grow exponentially and their stock is likely to follow. The IPOs of these companies will create thousands of new millionaires and more than a few billionaires out of long-time employees. Investors are hopeful they’ll join those ranks as AI companies grow.
To be sure, AI has already helped drive valuations for both the S&P 500 and tech stocks within that index above the historical average. And governments are handing out billions in contracts to AI companies.
There is a potential light at the end of the tunnel. Anthropic is expecting to report its first profitable quarter in June, as revenue is set to more than double to $10.9 billion in the second quarter. Reports say the company expects to turn a $559 million profit at the end of the current quarter. That would make it the first major AI company to report a profit.
The bear case
Anthropic is an outlier, though. OpenAI, according to citing internal documents, is predicting a $14 billion financial shortfall for 2026 (and won’t be profitable until 2029). And in the first quarter of 2026 alone, SpaceX lost $4.3 billion.
SpaceX is the only AI company whose S-1 filing with the Securities and Exchange Commission has been made public. That form details a company’s finances before it sells shares. A growing number of analysts, though, are sounding alarms about what they’re seeing.
“There’s no getting around it — these numbers are terrible,” wrote Ed Elson, an analyst who also co-hosts the Prof G Markets podcast with entrepreneur Scott Galloway. “I’ll put it simply: slowing revenue + skyrocketing expenses = not good. … The stock is set to be priced at 107 times sales, which would make it one of the most expensive stocks in history. It will be twice as valuable [as] Walmart while generating less revenue than Macy’s.”
Morningstar’s Nicolas Owens says his fair value estimate of the company’s worth is roughly $780 billion, less than half of what the company is targeting. And Aswath Damodaran, a professor at NYU’s Stern School of Business who is best known as the “dean of valuation,” says he believes SpaceX equity value is roughly $1.3 trillion, nearly a half billion less than the company claims.
Valuations aside, the tsunami of shares about to hit the market could overwhelm demand, which would impact share prices and investor portfolios. Retail investors, who buy into the cult of personality surrounding some of the CEOs of these firms, could face tremendous volatility.
The bigger picture
The big concern for some economists is what happens if the AI bubble follows the trajectory of the dotcom bubble, only at a much, much larger scale? Capital expenditures are higher than ever, as are valuations.
There’s also some level of circular financing. OpenAI, in March, announced a $110 billion funding round, with $50 billion coming from Amazon and $30 billion from Nvidia, along with other backers. AMD and Meta, that same month, unveiled a partnership that will see the chipmaker deploy 6 gigawatts worth of graphic processing units to Meta’s AI data centers while the social media/AI giant may take up to a 10% stake in AMD. OpenAI and AMD have struck a virtually identical deal. The problem with money changing hands in that way is it can overinflate the value of the AI industry, blurring the lines between real demand and companies buying from themselves.
“We’re not dealing with a very diversified industry here,” Jacob Bourne, an analyst with Emarketer, told Fast Company at the time. “This is not a validation of organic demand for AI. They’re making these deals and it’s circular. It’s a blurring of the line between customer revenue and partner investments.”
Fidelity has raised similar warnings, writing “a percentage of AI investment is traveling in a loop among a small number of companies, making it harder to accurately measure the level of demand outside of those firms.”
Fidelity, which is largely bullish on AI, notes that bubbles tend to burst after an extended period of liquidity with low interest rates comes to an end with the Federal Reserve raising rates to fight inflation.
The Fed hasn’t raised rates since July 2023 and Donald Trump is pushing hard for more cuts. Fed watchers say they don’t expect a rate hike soon, but odds of an increase by year’s end are growing as inflation has proven persistent.
If those rate increases continue, bubble fears could grow. The best protection for investors? Make sure you own more than AI companies in your portfolio.
“Like all thematic investments, it’s important to balance AI-related holdings with a healthy mix of other equities, including other large caps, international equities, mid caps, and select value stocks,” wrote Fidelity.