Kevin Hebner
Investors cannot afford to ignore artificial intelligence (AI), as the market capitalisation of the top global companies is set to leap to new highs – with upcoming IPOs from SpaceX, Anthropic and OpenAI expected to reshape stock market indices, according to Dr Kevin Hebner, managing director and global investment strategist at TD Epoch.
SpaceX is expected to be the largest IPO, raising about US$75 billion. With two more mega IPOs expected to launch in the next six months, all three will enter the indices quickly and change the Mag7 to the Mag10.
“SpaceX is set to be the biggest IPO ever. The company will be raising somewhere in the neighbourhood of US$75 billion, with 30 per cent of funds raised coming from retail markets. It’s going to be massively oversubscribed.
“It is an exciting deal and if it does come out at a valuation around US$1.75 trillion, it will be the sixth or seventh largest global tech company immediately, sitting just below Amazon (NASDAQ: AMZN),” he says.
SpaceX is more than just rockets. “There are three components to SpaceX. There’s the rocket ‘launch’ with Starship Version 3. There’s the communication business, with Starlink satellites, which is growing very rapidly. And then there’s the AI business. That is what most of the value in the IPO is being attributed to.
“Much of the valuation is effectively a call option on space and all the future possibilities that come with that (orbital data centres, a base on the moon or even mars). It is this element of hype or speculation, that adds to the excitement of this IPO,” he says.
Later this year, Anthropic, valued at around US$965 billion, is expected to IPO and following suit will be OpenAI which is expected to be valued at roughly US$850 billion.
“With the addition of these three companies, we will no longer have the Mag7, we will have the Mag10. The market capitalisation of the current Mag7 with the inclusion of these three companies will amount to around US$25-$28 trillion. This is likely to exceed the market capitalisation of all global equities in the world, excluding the US,” says Hebner.
The three companies will be quickly added to the indices, meaning institutional investors will be forced to buy it regardless of their concerns about valuations and volatility.
“Investors may not be interested in the ‘Mag10’ and AI and think it highlight speculative, but the reality is that the market cap for the upcoming Mag10 will be enormous.
“Given how critical it is to market valuations overall, investors will need to pay attention and know a lot about these companies and AI when investing in the market,” says Hebner.
