Is the AI frenzy coming to an end with the IPO? Bank of America analysts warn that the "market is overheating," and the end of the tech stock bull market is near?

The potential initial public offering plans of tech giants have sparked intense market attention, but Wall Street analysts warn that the estimated $4 trillion valuation of the three giants could drain liquidity from the U.S. stock market.

As one of the few opportunities for investors to directly participate in AI model development and aerospace technology growth, the market is highly focused on the IPO plans of tech giants like SpaceX, OpenAI, and Anthropic. However, both historical experience and Wall Street analysts are cautioning that the massive supply of new shares could become a critical turning point ending the current tech bull market in the U.S.

Analysts on the AI Giants IPO Wave: $4 Trillion Valuation Could Deplete U.S. Stock Market Liquidity

According to the Financial Times, after a large IPO wave, the performance of the major indices typically tends to be relatively weak. The main reason is that the large issuance of new shares absorbs market funds, leading to a sharp reduction in liquidity capable of supporting stock market gains.

Currently, most Wall Street analysts believe the market still has the capacity to absorb new shares, but the potential combined valuation of SpaceX, OpenAI, and Anthropic could reach $4 trillion, about 6% of the entire U.S. public stock market. This scale is comparable to the stock expansion levels during the late 1990s internet bubble. In comparison, after inflation adjustment, the total first-day market capitalization of all U.S. IPOs from 1980 to 2025 is approximately $12.5 trillion, highlighting the astonishing scale of this potential IPO wave.

Shift in Capital Structure: Tech Companies Issuing Debt and Central Bank Policies Add Variables

This wave of new share issuance is not limited to the three major giants; well-known tech companies like Stripe and Databricks may also join the listing queue. Currently, the capital expenditure of major U.S. cloud service providers is estimated to far exceed the railroad construction boom of the 19th century. Historically, these investments relied mainly on operating cash flow, but as cash flows tighten, some large tech stocks have slowed their buyback programs and shifted to debt financing to cover expenses. In the future, they may even raise funds or acquire through issuing new shares.

Citi Group’s former global equity strategist Robert Buckland pointed out that over the past 20 years, due to delistings, buybacks, and M&A activity, the U.S. stock market has shown a "de-stocking" (reduction in supply) trend, which has been key to the market’s resilience against high interest rates and geopolitical risks, allowing it to reach new highs repeatedly. However, the large influx of new listings could break this protective shield. Additionally, the new Federal Reserve (Fed) Chair Kevin Warsh’s goal to shrink the central bank’s balance sheet, combined with potential rate hike pressures, is causing the market’s liquidity pool to face risks of contraction. Monitoring insider selling after IPO lock-up periods will be an important indicator of whether the market has peaked.

Bank of America Warns: Excessive Concentration of U.S. Market Cap Could Repeat Historical Bubbles

Bank of America analyst Michael Hartnett issued a strong warning, pointing out that investor enthusiasm for AI stocks and the potential super IPO wave are pushing U.S. market capitalization concentration toward extreme historical levels. In his report released on May 22, he noted that if SpaceX, OpenAI, and Anthropic are added to the existing AI leaders, this group would account for 47% to 48% of the total U.S. stock market value, surpassing the internet bubble, the Japanese stock market bubble of the 1980s, and the "Nifty Fifty" era of the 1970s, second only to the railroad mania of the 1880s. Hartnett emphasized that the market currently exhibits signs of speculative overheating, including strong price momentum, low volatility, and a surge of retail investors.

Asian Semiconductor Price Surge Triggers Inflation Concerns, Bull & Bear Indicator Signals Sell

Amid the AI rally, the biggest concern comes from the rising yields of government bonds. As global borrowing costs increase, some economies are showing signs of stress. Hartnett observed that Asian currencies like the Indian Rupee and Indonesian Rupiah are weakening, indicating mounting pressure in high-risk markets.

Currently, the U.S. Bank’s "Bull & Bear Indicator" has reached 8.0, triggering a reverse sell signal. Historical data shows that when this indicator exceeds 8, it often predicts that global stock markets will face an average decline of 2% to 3% over the next two to three months, with maximum corrections reaching 15% to 20%.

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Despite the warning signals, the capital party has not yet stopped. U.S. stock funds have experienced net inflows for eight consecutive weeks, with tech funds attracting a record $9 billion, the highest since October 2025. Private wealth clients of Bank of America have their stock allocations at 65.7%, a new high, while cash levels have fallen to nearly 10%, a historic low.

In the face of an uncertain market, Hartnett recommends investors adopt a "long but highly cautious" strategy, and consider focusing on small tech stocks that utilize AI to disrupt traditional industries, as potential defensive and strategic positions after the market peaks.

• This article is reprinted with permission from: 《Chain News》
• Original title: "Celebration Ends with IPO Frenzy? BofA Analyst Warns: Market Overheating Could End Tech Bull Market"
• Original author: Co2