SpaceX, Anthropic, and OpenAI are planning massive initial public offerings right now. But the artificial intelligence (AI) boom actually has been going on for quite some time. AI stocks have pushed the bull market higher quarter after quarter, driving the S&P 500 to a 77% increase over the past three years. Investors are excited about this technology that promises to transform the way business is done — and so they’ve piled into companies driving AI, such as chip designers and cloud service providers. These players, including Nvidia (NVDA +2.08%) and Alphabet, have seen their stock prices jump in the triple digits in just three years.
The AI boom immediately delivered revenue growth as AI customers rushed to these companies for the chips and capacity needed to train large language models. And these well-established tech players continue to offer investors growth thanks to their presence in AI.
But now, as the three younger AI giants prepare to launch IPOs, should you continue to buy older market giants — or wait for the supersize IPOs of SpaceX, Anthropic, and OpenAI? Let’s find out.
Image source: Getty Images.
Companies driving the AI boom
As mentioned, so far, companies that have been around for quite some time have driven this AI boom — from an earnings and stock performance perspective. These are tech giants that have built out their businesses, unrelated to AI, over time. For example, Nvidia’s chips primarily served the video games market many years ago, and Alphabet’s main revenue stream is advertising across its Google platforms, such as Google Search. So these and other tech companies — from Amazon to Broadcom — built out successful businesses before even getting involved in AI.
In recent years, though, AI has offered them a new growth opportunity. And today these companies are benefiting from this as well as from the stability of their earlier revenue streams constructed over time. Investors, looking for AI winners, piled into shares of these players, particularly those that were the first to monetize their AI investments.
Now, however, investors interested in AI have the opportunity to get in on three new AI stories. These are younger companies, and two in particular are highly focused on AI. These are AI labs Anthropic and OpenAI, makers of Claude and ChatGPT, respectively. And the third is SpaceX, operating three businesses: AI, rocket launches, and satellite-based internet.
SpaceX has filed for an IPO, and though the company hasn’t set a date, press reports indicate it may happen on June 12. Anthropic this week confidentially filed for an IPO — it hasn’t set a date yet, but this move suggests the operation is likely coming soon. (When companies file “confidentially,” it means they haven’t yet made their prospectus public — that will happen later, at least 15 days before a roadshow.) Finally, OpenAI is preparing to file for a stock market debut, The Wall Street Journal reported late last month.
Trillions of dollars in market value
These operations could represent trillions of dollars in market value. SpaceX is aiming for a valuation of nearly $2 trillion, Anthropic’s valuation recently reached $965 billion, and OpenAI has hit a valuation of $852 billion. Investors may consider participating in the IPOs — SpaceX even plans to earmark 30% of shares for retail investors, a much greater percentage than the average IPO. Most such operations make more than 90% of shares available to institutional investors.
Now, let’s return to our question: If you’re looking for AI growth, should you invest in the market leaders that have been around for decades — or should you wait to get in on these IPO stocks? The answer depends on your investment strategy. Cautious investors should favor the longer-established tech players that also have businesses outside of AI — such as Alphabet, Amazon, and even Nvidia, which is expanding its presence well beyond the AI chip. They may offer you security as well as growth as the AI story unfolds.
If you’re more of an aggressive investor, you might consider adding shares of these IPO stocks to your portfolio — but you don’t have to rush to get in on the actual operations. History shows us that even the best of stocks offer various entry points over time. So, if you don’t actually participate in the IPO and get the stock at the offer price, you might consider waiting and eventually buying on the dip.
Finally, the best approach of all may be diversification — investing in a basket of well-established players and certain IPO players, as long as you get in at a reasonable price and hold on for the long term.
