SpaceX's offering coincided with the June peak in semiconductors
Anthropic wants to raise $62.5 billion from investors during a massive public offering set for next week.
The artificial-intelligence trade is bruised, but it has managed to hold up remarkably well in light of former Nvidia CEO Jensen Huang's abrupt resignation last week from the chip designer that he steered for more than 30 years.
Still, there are worries that stocks could struggle as the latest large-scale public-equity offering is about to hit the market. The fear is that investors will dump shares of companies they already own to buy into the latest mammoth offering.
Anthropic said on Tuesday it is seeking to raise $62.5 billion from investors during a behemoth IPO this week, as well as an additional $26 billion private placement from technology companies, including Nvidia (NVDA) and Micron Technology (MU).
Right to worry
Volatility has accompanied other recent high-profile IPOs: SpaceX's (SPCX) biggest-ever offering on June 12 followed about one week after a painful June 4 selloff inspired by a hotter-than-expected jobs report and concerns related to the IPO.
It also nearly top-ticked the rally in semiconductors; shares of Nvidia (NVDA) are down by more than 20% since, and a broader index tracking the space is also well below its June highs, FactSet data showed.
"People are right to be worried, especially with everything that's going on," said Mark Hackett, chief market strategist at Nationwide.
'There's a lot riding on this'
The historical record offers some reason for caution. Data from Sifma showed that previously, bear markets have followed past years of peak IPO issuance - although the sample size is small, at just two.
An estimate from Goldman Sachs Group showed the bank expects IPOs to raise about $250 billion in 2026 and even more in 2027. Previous peaks arrived in 2000 and 2021, according to the Sifma data.
To be sure, the market has already been struggling as of late, particularly the high-flying tech space, which had driven much of the broader market's gains from earlier in the year.
As of Friday's close, the Nasdaq Composite COMP was nearly 10% below its October record high. Stocks have already defied the typical historical pattern, which sees major indexes climb after a midterm election vote. The S&P 500 SPX has held up far better, however; it is down just 3.3% from its latest closing high.
Recent reports that Anthropic's offering is heavily oversubscribed have helped to boost investors' confidence, said Jose Torres, an economist at Interactive Brokers. Still, it will be a big moment with potentially broad consequences for the market if shares struggle out of the gate.
"There's a lot riding on this," Torres told MarketWatch.
Still, a lot of negativity has already been priced in. Major indexes are off their peaks, and some hot AI stocks that had benefited from the AI bottleneck trade - like Caterpillar (CAT), for example - have seen their prices cut in half, or worse, since June.
The Cboe Volatility Index VIX, better known as the VIX, or the stock market's "fear gauge," finished Friday at 18.92, just shy of its long-term average.
A closer look
A team of equity strategists at Deutsche Bank decided to look at the historical record from a different perspective. Parag Thatte and Binky Chadha identified multiyear "upcycles" in equity issuance over the past three decades.
They found that strong periods of equity issuance tended to coincide with long-running bull markets - not the other way around. This supports the conclusions found in academic literature, they said.
"There is rising investor concern that the surging issuance would be funded from the broader equity market and cause a selloff. Meanwhile, prior academic literature points to the causality running from market conditions to issuance rather than the other way round," the team wrote in a report from June.
'They're volatile in their first year'
Wealth managers who spoke with MarketWatch said their clients were definitely interested in owning Anthropic at the IPO.
But in the past, public debuts of the largest publicly traded companies in the U.S. have had a rough start.
History offers a sobering reality check for investors rushing to buy into blockbuster listings on day one. Across the 20 largest traditional U.S. IPOs by offer size since 1990, 15 fell below their offer price within their first year of trading, suffering a median drawdown of 40.9% from their debut.
Only five - Medline $(MDLN)$, Snowflake (SNOW), Airbnb (ABNB), Citizens Financial $(CFG)$, and DoorDash (DASH)-managed to stay above water throughout their first 12 months on the public market.
"They're very volatile in the first year," said Michael Casper, senior market strategist and director of equity at HB Wealth, in a phone interview. "Most of them do experience some kind of significant drawdown."
A more direct stake
Despite the risks, many believe the Anthropic IPO could help to rally investors back behind the flagging AI trade.
Jawad Mian, founder of Stray Reflections, an investing newsletter, said that Anthropic's offering will give investors a unique opportunity to invest in a pure-play model builder.
"Until now, much of that enthusiasm has flowed into the companies supplying the chips, cloud capacity and infrastructure. Anthropic gives investors a more direct stake in the intelligence being built," Mian said.
"Anthropic is more likely to redistribute the AI premium than derail the equity market."
-Joseph Adinolfi -Christine Idzelis
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