The biggest IPOs look a lot like the biggest stocks in the market: Morning Brief
The S&P 500 (^GSPC) is back near record levels with the largest tech stocks in the market once again leading the market higher.
After struggling to start the year, the "Magnificent Seven" stocks of Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) have combined to account for 62% of the S&P 500's advance in May. Outside of Apple, all other members of the Mag 7 outperformed the S&P 500 last month.
This has been the trend dating back to the start of the bull market in the fall of 2022, when ChatGPT was first launched.
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And in recent weeks, investor excitement surrounding Big Tech has trickled down to newly issued public offerings.
Shares of stablecoin issuer Circle (CRCL) have surged more than 240% from its IPO price. The massive rally follows a successful IPO from Nvidia-baked CoreWeave (CRWV), which has seen its stock rise nearly 300% since its March 28 IPO.
In a June 9 research report, Carson Group associate portfolio manager Blake Anderson analyzed the performance of 23 "large IPOs," defined as raising more than $500 million in proceeds from the offering since the start of 2024.
Anderson found that shares tied to tech IPOs have risen an average of 108% from their deal price. Conversely, non-tech IPO companies have seen their stock rise "just" 49% from their deal price, a return that is nothing to shrug off but shows the massive outperformance seen in tech-related themes.
The enthusiasm for tech, and AI specifically, has also been seen in companies yet to go public.
In March, OpenAI (OPAI.PVT) raised $40 billion in new funding at a $300 billion valuation. Reuters recently reported that xAI (XAAI.PVT) is in talks to raise roughly $20 billion in equity funding, which would place the company's valuation north of $120 billion.
From private to public markets, the takeaway has been clear: Investors continuously want a stake in emerging technology companies involved with AI or crypto.
Since the launch of OpenAI's large language model on Nov. 30, 2022, Nvidia, Meta, Vistra Corp (VST), Super Micro Computer (SMCI), and Coinbase (COIN) are the top performers in the S&P 500.
That puts themes relating to AI chips, AI use cases, AI power, and cryptocurrencies among the most-loved stocks in the market over the past two and a half years.
And it's one of several signs that as the S&P 500 has rebounded from the tariff turmoil of the past few months, the market zeitgeist of the current bull market hasn't materially changed.
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