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Mega initial public offerings from SpaceX (SPAX.PVT) and OpenAI (OPAI.PVT) could push the artificial intelligence trade deeper into bubble territory — just as rising yields make investors more demanding about growth that may take years to arrive.
Bank of America’s Michael Hartnett estimated that adding mega IPOs to today’s AI leaders could push market concentration from 40% currently toward 48% of US market cap, above the peaks of the Roaring ’20s, Nifty Fifty, Japan ’80s, and dot-com bubble — though still below the railroad boom of the 1880s.
That is where the bond market comes in. SpaceX and OpenAI would ask investors to pay for growth years into the future, while rising yields make that wait more expensive.
The inflation backdrop is already close to BofA’s danger zone.
Headline inflation, as measured by the Consumer Price Index, rose 3.8% in April, putting it within sight of the 4% threshold BofA flags as historically rough for stocks. When CPI first crossed 4% in past cycles, the S&P 500 averaged a roughly 4% loss over the next three months and nearly 7% over the next six, according to BofA.
That does not mean SpaceX or OpenAI would necessarily mark the top. BofA’s review of the largest IPOs shows a messy record: some fueled rallies, some arrived near weaker markets, and several barely moved the broader benchmark. The listing is not the signal by itself. The market backdrop is.
That pressure is already showing up across markets, with the 30-year Treasury yield (^TYX) pushing back toward the 5% zone that has repeatedly tested stocks.
That is the real IPO test.
A hot SpaceX or OpenAI debut could still extend the AI trade. But if inflation pushes through 4% and yields keep climbing, the market may start asking a harder question: how much is future growth worth when the wait keeps getting more expensive?
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.
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