OpenAI IPO Delay: Learn from SpaceX's Volatility
💡 Key Takeaway
IPOs of large AI companies are historically volatile, so investors should wait about a year after the IPO before buying.
What Happened: OpenAI Delays IPO to Avoid SpaceX's Volatility
OpenAI, the company behind ChatGPT, is reportedly considering delaying its IPO until 2027, aiming for a $1 trillion valuation. Advisors to CEO Sam Altman are citing the post-IPO volatility of SpaceX as a reason to wait.
SpaceX went public at $150 per share, spiked to $225, and has since fallen back to around $156. Cerebras, another AI IPO, experienced a similar spike-and-volatility pattern.
Both companies are burning through cash on AI infrastructure. SpaceX reported a $5 billion net loss last year with $20.7 billion in capital expenditures. OpenAI's losses are estimated at $21 billion on $13 billion revenue.
Investors are growing skeptical about when these AI companies will turn profitable, given their massive spending on data centers and computing power.
Why It Matters: IPO Volatility Is the Norm, Not the Exception
Research shows that IPOs of companies worth over $10 billion average a 26.5% first-week return but only 3.5% after one year. This suggests that even without a delay, OpenAI's stock would likely be volatile and potentially underperform.
The delay itself signals that OpenAI is sensitive to market sentiment, which could be a red flag for investors looking for stable growth.
For investors in SpaceX and Cerebras, the pattern is already playing out. The article suggests waiting about a year after any AI mega-IPO before buying to avoid the initial volatility.
If AI spending continues without clear profitability, the entire sector could face headwinds, affecting not just pure-play AI companies but also infrastructure providers like Alphabet.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
Avoid buying AI IPO stocks for at least a year post-listing due to historical volatility and spending concerns.
IPOs of large companies are statistically volatile in the first year, and AI companies are burning cash with no near-term profits. Waiting allows the hype to settle and fundamentals to emerge.
What This Means for Me
