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Chapter 1: Why is there a surge in tech stock listings?
PUSHKIN
The hands down best bet that any investor could have made in the past few years is to buy US tech stocks. Winner, winner, chicken dinner. Well, the majesty of markets serves to give the people what they want, damn it. So guess what we have coming our way? Yep, it's more tech stocks, a lot more. It's a feeding frenzy, people.
Some massive razzle-dazzle tech companies are lining up to hit the stock markets for the first time. We've already chatted about one of them, SpaceX, on the show, but we're also talking here about the likes of OpenAI, which runs ChatGPT, and Anthropic, which Rob can't pronounce for some strange reason.
Anthro-who? I don't know what you're talking about. I don't even know what company you're referring to. These words are a mystery to me.
But it makes Claude. Plus, we have a bunch of other tech monsters that are already listed that are pumping out more of their stocks onto the markets. Today on the show, is this a golden opportunity for investors or a sign that the exuberance is getting out of hand and a crash is coming? This is Unhedged, the markets and finance podcast from the Financial Times. I'm Pushkin.
I'm Katie Martin, a markets columnist at FT Towers in a very soggy London. All the rain, finally. Joining me through the magic of technology in New York City is Rob Armstrong, my partner in crime on the Unhedged newsletter. Rob, are you excited? Do you feel the buzz, the feeding frenzy?
I'm still stinging from you making fun of how I pronounce company names. I just like to say that I'm a visual learner and that I learned from reading. And so I don't know how to pronounce a lot of things. And I apologize.
Yeah, you live in a cave and you don't talk to people.
But I do feel the buzz, Katie, to answer your real question. It's an exciting moment in markets.
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Chapter 2: What companies are leading the charge in new IPOs?
Yeah. So the big picture, before we come on to those specific others, the big picture is that stock market listings are like back with a vengeance. So we've had four really slow years for listings. And now we've had 40 deals in the U.S. with a combined value of $28 billion. Wow.
that have hit the market this year so that's the highest tally to the end of may for any year since 2021 and 2021 was gangbusters so we've had loads of these things we're probably by the time this year comes to an end not going to have an a super unusually large number of new companies on the stock market but in dollar terms these guys are really going for it right so goldman sachs
is saying they reckon there's going to be $225 billion worth of new volume on the market. And including all like other stuff, like follow-ons and other issuance from companies that are already listed, they reckon it's going to get to $675 billion. It's a lot.
It is a lot. I should note that the total market cap of the U.S. stock market is something like $75 trillion. So adding less than a trillion to that doesn't sound like a lot. But these things are always quite finely balanced. Adding a couple of percent more supply to something that had a bit of a fixed supply before can make a difference at the margin.
And I think we're going to feel that this year for sure.
Yeah. And it's no coincidence that all the really kind of razzle dazzle exciting new listings that are coming, they're all in tech. They're all in AI. And one interesting thing about that to me is that something that stock market investors like professionals whinge about all the time is that companies stay private for ages now.
They've become like really massive companies while they're still sitting in private hands before they hit the stock market. So then there is a question around how much value has already been juiced out of them by private equity and whatever before they reach the public stock markets. So there has just been a really long wait for some of these companies to...
And now it's a rush. You know, it was like for a long time there was all this talk about, you know, why don't U.S. companies invest heavily? Why don't they don't do capital expenditures? And now we have like the heaviest capital expenditure cycle we've had in decades. And investors are like, not like that.
No.
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Chapter 3: Is the influx of tech stocks a sign of market exuberance?
OpenAI is the last really big one to come through. Each of these things are going to be something in the order of, like, A trillion.
Trillion plus.
In market capitalization. That's a lot. So we've got all this hype and excitement about these new companies that are going to come to market. And then... Pretty randomly to my mind, Alphabet comes along. Alphabet, which runs Google, of course, it's already listed. It's a four point something trillion dollar company already. Everyone knows Alphabet. Everyone knows Google. They're already listed.
And they said, well, we're going to issue an additional 80 billion dollars worth of stock onto the market. Like that to me, like came from nowhere. Why do you think they're doing this?
I think they're doing it because it makes sense to do it. And there's a couple of ways to think about it. Back in the bygone days of March 2025, when we were all so young and naive, the shares of Alphabet were $142. Now they are 364. So they have gone up a lot. And what that means is for every new share that Google offers, they get a lot of money from investors in return.
And so basically, there is, as you put it, great demand out there. And they're like, great demand. Let's hit it with supply. And this happens at a time when Alphabet is spending a lot of money on data centers. They're spending a lot more. The market is offering them money at a very attractive price. And they said, sure, we'll take some of this money.
Yeah. So they did the century bond. They're doing loads of other bonds like the market is just lapping this stuff up so they can they can issue debt. They can issue shares. Investors love all of this stuff. I wonder if there's a part of what Alphabet has done here, which is to say, listen, all these big listings are coming from all the other guys. Why don't we just like get in ahead of that?
Yeah.
And absorb some of the demand there.
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Chapter 4: How does Alphabet's stock issuance impact the market?
Follow the instructions. I'll wait for his call. Yes. So we've got this feeding frenzy of exciting new AI-flavored companies that are about to hit the stock market. And look, there's just a little part of miserable people who are like... This really rhymes with something. And that thing that it rhymes with is that period before the dotcom crash in the year 2000. Right.
Then you had like a whole bunch of companies, some of which have died entirely and some of which are now just tiny and irrelevant. We had a whole bunch of companies hit the stock market. And in retrospect, when you look back on that, that was the top. When you get lots and lots of companies hitting the stock market, that is the top.
Right.
Now, you get lots of false positives here. And just because you have new listings doesn't necessarily mean that something terrible is going to happen. But it does make people sort of sit back and say, huh, all these people who run these massive, very successful companies... Why do they want to sell out now? What do they know that we don't? You know, it does make you a bit suspicious, doesn't it?
I think that is right. And it is healthy to be suspicious. And that is why it is good that there are people like Katie Martin in the world. Professional, suspicious person, Katie Martin. But, you know, I think the other side is... It does look like there is a lot of demand for this new technology, demand that wasn't there for, to use the old cliche, pets.com or webvan.
We've talked on the last show about Anthropix's actual revenue growing by leaps and bounds in the billions. No, I'm going to pronounce it wrong. Every single time for the rest of my life, just to annoy you, Katie.
Fine.
Anthropik is growing by leaps and bounds in terms of revenue. And we know that there is more demand for AI compute than the people who are supplying it can supply. It is an open question how much of that AI compute is being used to make videos of cats playing the piano or other slop. Yeah. Fair enough. Actually, that is a serious question for calculating the impact of AI on GDP, the slop problem.
I was talking to an economist about this just the other day, and it's a serious open question. But we know there is demand here. We know there is demand here. In a way, there wasn't demand for Webvan or Pets.com.
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Chapter 5: What are the implications of increased supply on stock prices?
They've been a concern for the last 15 or 20 years as the market has hit one new valuation high after the next. I have a kind of macroeconomic worry which is that The kind of barnstorming American consumer economy is now on a gentle glide path down.
It's still, you know, consumption is still growing in real terms, but it's weakening and real incomes are now kind of growing at kind of zero to slightly negative with inflation. And so that side of the economy is going down. One direction. And we have this kind of technology investment side of the economy growing in a totally different direction. And I just wonder if that contrast is healthy.
You know, we don't want to be. A purely investment driven economy or a largely investment driven economy. There is a country that has tried this. It's called China. And it has a lot of unpleasant side effects. So I think that's not a trend to panic about right now.
But I think there is a there is a kind of macroeconomic tension that we should keep an eye on over the next couple of years at the very least.
The other tension is that just as all these companies are planning to list, the way that they list is to say to investors or prospective investors, we're going to make shed loads of money. But it's still not proven that people are going to be willing to pay for AI services on that sort of scale. So why? We still don't know.
There's a lot of things we don't know about the business model of AI, whether that's on an enterprise level. So you sell it into companies or whether it's selling it into consumers. So we don't know how commoditized this stuff is. Do we really need all of these companies?
We don't know what the margin is going to be. You know, right now, a lot of these companies are selling computer power.
basically at a discount and there's a lot of demand for it at a discount but when you're selling it at a price that gets you a good margin what happens to demand you know animal spirits my favorite phrase uh calls to mind little ghost dogs and cats uh animal spirits are very strong and that is always a source of fragility and you know we're gonna have to ride it out
We are going to see. Listen, we're going to have to come back in just one second with Longshot.
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