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- [00:00]
A
Foreign. 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.
- [00:52]
B
Anthropom. 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.
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A
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 and 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?
- [01:41]
B
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.
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A
Yeah, you live in a cave and you don't talk to people.
- [01:58]
B
But I do feel the buzz. Katie, to answer your real question, it's, it's an exciting moment in markets.
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A
The buzz is real. It's all about three little letters, right? Ipo. These are initial public offerings, which is a fancy way of saying new listings on stock markets. And they are back.
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B
Yeah, we hit SpaceX, about which we're a little bit skeptical because of the no profits problem. But that makes us fuddy duddies, sticks in the mud, fun sponges. But there's others.
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A
Yeah. So the, 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 US with a combined value of $28 billion 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 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, on the market. And including all like other stuff new 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.
- [03:31]
B
It is a lot. I should note that the total market cap of the US 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. You know, adding a couple of percent more supply to something that had 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.
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A
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 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.
- [04:39]
B
And now it's a rough, you know, it was like for a long time there was all this talk about, you know, why don't US 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, that's not what we meant. And similarly it's like where's all the IPOs? And I was like whoa, whoa, whoa,
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A
you know, it's a lot of IPOs. So yesterday, which was Monday, as we record this anthropic, Rob said aloud, anthropic
- [05:18]
B
Okay, I think I have it now.
- [05:20]
A
It filed for its stock market listing. It's looking at a valuation of more than $1 trillion. It submitted the paperwork. This thing is going to go ahead in, in the next few months. SpaceX, Elon Musk's AI space satellites thing that we talked about on the show the other day, that should be coming also in the next few months. Open AI 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 like 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, everyone knows Alphabet, everyone knows Google, they're already listed. And they said, well, we're going to issue an additional $80 billion worth of stock onto the market. Like that to me, like came from nowhere. Why do you think they're doing this?
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B
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.
- [07:22]
A
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 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 get in ahead of that and absorb some of the demand there? Which is quite annoying of them, which I like it when people are deliberately annoying. But the next day the market opens somewhat down for Alphabet. So I wonder whether this is Telling us, I don't know, I don't want to read too much into it, but I think it's saying that this isn't an infinite pot of money.
- [08:11]
B
No. So the stock opened down almost 4% and now I think it's at about two and a half as we record. So that is, you know, they're diluting the shareholders, meaning adding more to the, you know, if you're a current shareholder and a company sells more stocks, the value of each of the shares you hold goes down a little bit. That's called dilution. And this will dilute Google shareholders by less than 2%. The stock is down 2 1/2 percent. So I think the market is saying we don't love on first blush. We don't love the idea that you're just running around diluting us. And please don't go crazy with this stuff. Yes, but at these prices, I don't understand why more companies aren't doing it. I think Meta should be issuing equity. You know, go for it. You know, go while the. Go while the money's good. If you're going to spend all this money, fund some of it with equity so you're not saddled with debt for a million zillion years, do a nice healthy mix of the two. And I think Google Alphabet rather is doing the right thing here. And I wonder if other tech companies will have the courage to follow in their footsteps.
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A
No doubt Mark Zuckerberg is hanging on your every word. Follow the instructions.
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B
I'll wait for his call.
- [09:32]
A
So, 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 dot com 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 top. Now you get lots of false positives here. And just because you have new, 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, 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?
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B
I think that is right and it is healthy to be suspicious. And that is why it is good 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 yeah, webvan. We've talked on the last show about anthropic. Actual revenue growing by leaps and bounds in the billions.
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A
Rock.
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B
No, I'm going to pronounce it wrong every single time for the rest of my life just to annoy you, Katie.
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A
Fine.
- [11:29]
B
Anthropic is growing by leaps and bounds in terms of revenue and we know that there is more demand for AI computer 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? 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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A
it is interesting, isn't it, how like the most advanced technology in human history is put into the hands of the general public and they're like, lol, I'm going to make a video of a cat playing the piano. Am I going to do something useful with this? Am I going to be a more efficient person? No, I'm going to make a video of a cat playing the piano. But, but one other thing about the these stock market listings and we again we spoke about this when we talked about SpaceX the other day, is that SpaceX, for example, says that it's worth $1.75 trillion. It is actually listing $75 billion. So it's listing 4% of itself on the stock market. And then insiders in the company, a lot of them have what you call lock inside. So they've got shares in the company and they're not allowed to sell them for a certain period of time. So one thing that a bunch of people are talking about at the moment is when do they sell and how much more supply of shares is that going to mean is going to hit the market. So for example, going back to Goldman Sachs, they were saying if you look at history where you have companies where they only list a little bit of themselves, over time, a lot more of those shares trickle onto the market. So they reckon we could be looking at an additional extra $500 billion worth of shares from lockups that expire over the course of this year. So again, if you look back to that period of the dot com boom and bust, it was the period at which a lot of those lock ins expired. That at least coincides quite awkwardly with that period where the stock market started falling apart. So it's really important to watch what the insiders are doing because if they really believe, if you're an insider at OpenAI or Anthropic or SpaceX or whatever it is, if you think that you own shares that are, that cost a hundred dollars today and they could be worth 200 tomorrow, why on earth would you sell them?
- [14:15]
B
Okay, I actually disagree with that. I would like, I would like to tell you why. If you, if you are like employee number nine at Anthropic, as I like to call it, the amount of shares you have, you are so rich selling at the current price. Do you know what I mean? And it's like the incremental return on more wealth than you would get, selling your shares now is just like a second house in the south of France. You know what I mean? It's like, oh, you know, and you don't really need, you know, the second flock of polo ponies or whatever, so you just say screw it and you sell and you diversify. So I don't think you can read one to one desire of insiders to sell to their suspicions about the future of their company or their openness to the fact that it's a bubble, et cetera. I'm sorry to rain on your cynicism parade, Katie, but you know, that's part of my job.
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A
It's not just me. It's not just me.
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B
Come on. It's not.
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A
But yeah, it is just a sort of little sort of tickle in the back of your brain that says, I wonder why they are listing all, all listing now. And I have no doubt that the market will absorb this stuff really, really easily because the enthusiasm for AI is so high and because again, as we spoke about the other day, been all these changes to the listing rules, which means that passive investment flows are going to be able to go pretty quickly into these companies, which is important.
- [15:43]
B
I would frame my general worry about this differently. You know, bubbles are always a concern. 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 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's a. There's a kind of macroeconomic tension that we should keep an eye on over the next couple of years at the very least.
- [17:02]
A
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, what 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 we still don't know. There's a lot of things we don't know about the business model of, of AI, whether that's on an enterprise level, so you sell, sell it into companies or whether it's, you know, selling it into consumers. So we don't know how commoditized this stuff is. We do. We really.
- [17:39]
B
We don't know what the margin. 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 calls to mind little ghost dogs and cats. Animal spirits are very strong and that is always a source of fragility. And, you know, know, we're going to have to ride it out.
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A
We are going to see. Listen, we're going to have to come back in just one second with long shorts. Alrighty. It is time for Long Short, that part of the show where we go, long a thing we love or short a thing we hate. Rob, what you saying?
- [18:38]
B
I am long. One of the absolute pillars of the modern world and the modern economy, which is the subversive cubicle dweller working for the huge soulless company. I think of this Every man, every woman hero Reading a story in the FT this week about how, in response to Amazon's measuring how much its employees were using AI and posting a leaderboard of the biggest users, Amazon employees invented programs that would do useless tasks on AI in order to drive up their score. That just makes me want to stand up and cheer whoever first thought up that idea. Email us and we will buy you a round of beers at the bar of your choice.
- [19:29]
A
Unhedged.com I do enjoy that as just a middle finger raised aloft in the direction of what else can many of
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B
us do in this life except annoying little crap like that? You know, that is our shout against the infinite darkness of the universe.
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A
You know the man. The man canceled the program annoyingly, yes.
- [19:53]
B
Marking a massive victory for the common man.
- [19:56]
A
I am Long Weather. Yeah, there's a lot. There's a lot of it. There's like really a lot of it here at the moment. But also we've got El Nino coming. A Godzilla El Nino coming, no less. So lots of things have gone wrong for food. So there's no fertilizer because of what's going on in and around Iran. And.
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B
And now we're gonna have Godzilla weather system.
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A
And now we've got this like Godzilla weather system coming along. So food prices watch out because the gods are unhappy. They're adding to food price inflation that's already in play. Could get messy. So I'm long weather. Good one listeners. Whatever the weather where you are, we're going to be back in your ears on Tuesday. So listen up then. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional additional help from Topher Forehead. Special thanks to Laura Clark, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free and a 30 day free trial is available to everyone else. Just go to ft.com unhedged offer I'm Katie Martin. Thanks for listening. Sam.