r/investing
With $1 trillion+ AI IPOs sucking up all the capital this year, are the crowded out stocks the real opportunity?
Questions if capital flight to mega AI IPOs creates undervaluation opportunities in established, profitable companies.
- Capital rotation from hyped AI IPOs may undervalue established profitable firms.
- Established companies offer safer fundamentals compared to speculative pre-IPO valuations.
- Market overcrowding in AI sectors creates relative value gaps in ignored sectors.
- AI sector momentum may continue to outperform regardless of valuation concerns.
- Established 'boring' companies may lack the growth catalysts driving market returns.
- IPO capital inflows might not significantly drain liquidity from broader equity markets.
There are some huge IPOs being talked about right now. OpenAI, Anthropic, SpaceX/xAI, plus all the AI infrastructure names around chips, data centres and compute. The obvious move is to chase the shiny new thing. But if these IPOs pull in a massive amount of capital, doesn’t that money have to come from somewhere? I’m wondering whether the better opportunity might actually be in established companies that are getting ignored while everyone crowds into the same AI and space trade.
If everyone is paying up for the future, are boring profitable companies becoming the better bet?
I’m not sure about OpenAI and Anthropic but spacex is only floating like 5% of their shares plus whatever employees end up dumping in a couple months
Even with a 1.75t valuation that’s only like 85 billion. That’s not like an excessive strain on market liquidity…. Might matter a bit and you might see some selling in other tech or even Tesla but probably not like market moving amounts
take this with a grain of salt cause I always buy high and sell low and then end up worse off ... But my line of thinking is that:
all stocks seem to drop in price after IPOs, then take a while to build back, so there will be plenty of people panic selling after a while
there will be plenty of people panic selling after a while
Not just panic selling, either. There will be a LOT of people -- "insiders" -- just trying to UNLOAD shares they haven't been able to yet. LOTS of shares coming on the market from those wanting to cash out.
Im usually pretty wrong, but I avoid Elon stocks like the plague cause while the value changes, there is not a single dividend payment ever... Id rather toss my money into google or apple or someone else who will at least send me $1.00 to make me feel better for buying at the wrong time
Richard Bernstein has been banging the drum for "boring is beautiful."
Boy, it's difficult to NOT read that as R-bad-visors ... and not confidence-inspiring!
SpaceX will be overhyped but will busy by their 2nd fiscal year
I am leaning towards to put money on Anthropic IPO. I am not feeling SpaceX or OpenAI.
There's closer to $10T in capital on the sidelines. So that's just 10% for the AI IPOs.
You are right about the capital on the sidelines but the SpaceX IPO is only raising like $75, it’s literally irrelevant to market liquidity
I'm actually putting more money into quality and dividend aristocrat companies right now even though i'm young enough for growth. I still buy growht every month, but its a smaller % than it used to and positions like SCHD or large cap quality / small cap quality are all looking a bit more attractive. I will definitely be in on part of Anthropic's IPO. I believe in what they're doing and if anyone is going to be the steward of an AI that doesn't kill us it will be them. I also believe that this wave of IPOs has the potential to shift enough capital in the market to trigger the reality check we have been waiting for. Within a year we will see how much of Data center rental, spaceX hype, and anthropic potential grow out demand for data centers has really driven actually revenue in the market. If its less than stellar, people will start to truly consider earnings again and if we are still sitting on 40-100 P/E companies after the hype train has lost its steam - you can bet people will migrate back to quality as the growth potential tapers off.
There are \~30% more ETFs being born this year than the expected number based on prior years + the general annual growth rate of ETF counts. There is a lot of artificial demand being driven by yield hungry investors hoping to capitalize on the next 30%+ gains. When those ETFs gets influxes of capital and go buy the underlying it does artificially push up prices that aren't totally based on revenue / cash flow and eventually sanity comes back when those speculative massive growths start to slow.
When those yields fail to deliver, people pull their money into the next big thing and that's when the shift happens. If a bunch of money leaves Semi's and moves into new IPOs - that can trigger the panic - a chain of panic sells plummets the price and investors go right to boring profitable companies and this is how sector and industry shifts can drive a greater market shift.