AI IPOs Spark Early Tax-Loss Selling Fears Among Investors
Investors are bracing for a wave of mega-cap AI IPOs from Anthropic and OpenAI, which could trigger early tax-loss selling across underperforming blue-chip stocks. According to a report by Evercore ISI, fund managers are preparing for these blockbuster offerings within their existing equity portfolios.
The current capital markets cycle is marked by the historic SpaceX public offering on June 12, which raised $75 billion at a $1.75 trillion valuation. While some market participants view this as a potential market peak, Evercore ISI dismissed concerns that the broader tech bull market is ending.
The analysts drew parallels between SpaceX's listing and Netscape's 1995 IPO, viewing it as the opening act of a long-term productivity cycle driven by transformative technology. They estimate that prospective IPOs from Anthropic and OpenAI could seek valuations of $100 billion and $60 billion, respectively.
To fund allocations for these upcoming mega-IPOs without adding leverage, portfolio managers are trimming underperforming holdings. Evercore screened for Russell 3000 companies with market capitalizations above $5 billion that are down over 10% year-to-date, trading within 20% of their annual lows, and facing negative three-month earnings revisions.
Selected Large-Cap Stocks Vulnerable to Liquidation include Tesla Inc, International Business Machines Corp, American Express Co, McDonald's Corp, Lowe's Companies Inc, Lululemon Athletica Inc, DraftKings Inc, and Trade Desk Inc. Bull market fundamentals remain intact, with classic indicators of a structural bull market top absent.