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The contrast in market sentiment between public and private markets has now reached an unprecedented level. Wall Street investors are growing increasingly worried about excessive borrowing by AI-related companies, semiconductor stocks have been hit by sell-offs, and Australian data center operator Firmus has withdrawn its IPO application — all signs that confirm this trend. But investors backing private tech startups remain highly enthusiastic, marveling at the rapid growth of startups like Fireworks AI.
This week, at Morgan Stanley's annual private tech company conference, I truly felt this polarization. Mutual funds and various types of investors gathered at a scenic seaside resort in Dana Point, California; they clearly saw a sea of "red declines" on trading screens, yet still scrambled to meet with dozens of startup founders, especially those in the hot defense tech and AI inference sectors. Diana Doyle, head of tech equity and equity-linked capital markets at Morgan Stanley, said on the sidelines of the conference: "You can clearly see a huge perception gap between the public and private markets."
Doyle, who is based in Silicon Valley, remarked: "In the private market, growth still trumps everything. Companies can chase growth at all costs, and investors are broadly gripped by a fear of missing out (FOMO)." "But the public market has returned to rationality, no longer believing in growth at any cost. It has become very difficult for listed companies to achieve high growth," she said.
One major factor fueling Wall Street's disappointment is rising interest rates, which will put enormous pressure on heavily indebted companies such as cloud service provider CoreWeave. But that is not the only reason public market investor sentiment has cooled. On Wednesday, shares of CoreWeave and its rival Nebius fell sharply; attending investors anxiously quizzed peers about Anthropic's latest third-quarter data, as the company is set to IPO next month. After 3 p.m., the news arrived: Anthropic's third-quarter growth had slowed significantly.
For most companies that have been around for five years, if they achieved such quarterly revenue, investors would already be raising their glasses in celebration. But Anthropic is different. Thanks to products like Claude Code and Cowork, its second-quarter revenue surged 140% compared to the first quarter. Yet third-quarter revenue grew only 45% relative to the first quarter — in the market's eyes, this is a worrying loss of growth momentum. The news prompted some investors to urge investment banks to cut Anthropic's target valuation to below $1.5 trillion, whereas banks had previously floated a target valuation of $2 trillion.
Meanwhile, some data center companies burdened with massive debt are still seeking extremely high IPO valuations, which has already triggered investor anxiety. For example, according to the Financial Times, Nscale, a company with multiple data centers not yet built, is seeking an IPO valuation of more than $35 billion. One fund manager said: "Based on the valuations these data center companies want, I really don't see how they can complete a listing."
But this dissatisfaction has not spread to startups that are happy to remain private. At the conference, investors rushed to connect with a group of hot private companies handpicked by Morgan Stanley, including Bezos's Blue Origin and Musk's brain-computer interface company Neuralink. In addition, investors are eager to reach a batch of emerging next-generation companies: chip startup Etched, Unconventional AI founded by Navin Rao, and legal AI firm Legora. Many are particularly focused on defense tech startups such as Anduril, Hadrian, and Saronic, whose funding valuations have already reached the multi-billion-dollar level. Many people told me that the business scale achieved by Fireworks AI, Baseten, and Fal AI is astonishing.
As relevant reports have noted, these startups providing AI model invocation services are seeing surging demand: developers are increasingly using open-source large models, which are often cheaper than the closed-source models of OpenAI and Anthropic. There is a question in these investors' minds: when will this batch of high-valuation AI-native startups see their first wave of listings. Compared with data center companies that carry massive debt and rely heavily on projects not yet under construction for revenue, AI-native companies appear to lack such shortcomings.
Of course, these startups will ultimately have ample reason to go public in the future. David Chen, global head of tech investment banking at Morgan Stanley, said of AI-native startups: "Capital is an absolute competitive weapon, just as in the semiconductor and hardware industries. Going public does bring significant advantages — you can access a large number of diversified financing tools, such as convertible bonds."
Of course, all of this depends on everything going smoothly. Anthropic's case has already proven that even top-tier AI startups find it very difficult to maintain exponential growth every quarter. And public market investors express their dissatisfaction in a very direct way.
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