The mega initial public offerings of SpaceX (SPAX.PVT) and OpenAI (OPAI.PVT) could push AI trading into bubble territory, just as rising yields make investors more demanding about growth that may take years to come.
Bank of America’s Michael Hartnett estimated that adding mega IPOs to current AI leaders could boost market concentration from the current 40% to 48% of US market capitalization, above the peaks of the Roaring 20s, Nifty Fifty, 1980s Japan and the dot-com bubble, though still below the railroad boom of the 1880s.
That’s where the bond market comes into play. SpaceX and OpenAI would ask investors to pay for growth in the coming years, while rising yields would make that wait more expensive.
The inflationary context is already approaching the danger zone for BofA.
Headline inflation, as measured by the Consumer Price Index, rose 3.8% in April, putting it within sight of the 4% threshold that BofA considers historically difficult for stocks. When the CPI first crossed 4% in previous cycles, the S&P 500 averaged a loss of about 4% over the next three months and nearly 7% over the next six, according to BofA.
That doesn’t mean SpaceX or OpenAI necessarily mark the top. BofA’s review of the largest IPOs shows a rocky track record: Some fueled rallies, others came close to weaker markets and several barely beat the broader benchmark index. The list is not the signal itself. The market context is.
That pressure is already showing up across markets, with the 30-year Treasury yield (^TYX) retreating toward the 5% zone that has repeatedly tested stocks.
That’s the real test of the IPO.
A hot debut from SpaceX or OpenAI could still expand AI commerce. But if inflation exceeds 4% and yields continue to rise, the market may begin to ask a more difficult question: How much is future growth worth when waiting continues to become more expensive?
Jared Blikre is Yahoo Finance’s global markets and data editor. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.
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