The biggest buyer disappears: The AI capital frenzy is reversing the US stock market's "de-equitization" cycle

Title: "Super IPOs and Massive Secondary Offerings Keep Coming! Under Massive Financing, One of the 'Core Highlights' of the U.S. Stock Market Is Gone" Author: Dong Jing, Wall Street Insights

Author: Rhythm BlockBeats

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Reprint: Mars Finance

SpaceX completes the largest IPO in history at $75 billion, OpenAI and Anthropic's mega IPOs are imminent, Alphabet plans to raise $85 billion through secondary offerings.

JPMorgan estimates that net equity supply will reach $1.5 trillion over the next two years; Goldman Sachs expects net supply to return to zero by 2026. The era of "de-equitization" that supported a twenty-year-long bull market in U.S. stocks has come to an end, and supply shocks may become a significant market obstacle.

SpaceX's record-breaking IPO, the upcoming mega IPOs of OpenAI and Anthropic, and Alphabet's plan to raise $85 billion through secondary offerings—a wave of equity financing comparable in scale to the internet bubble era—is sweeping through the U.S. capital markets. A key structural driver that supported the long bull run in U.S. stocks over the past twenty years is quietly disintegrating.

On June 15, Bloomberg reported that JPMorgan's calculations show that over the next two years, IPOs, secondary offerings, and other stock issuances, net of buybacks, will inject approximately $1.5 trillion of new supply into the U.S. stock market, marking the strongest net equity issuance cycle since at least the late 1990s.

Meanwhile, Goldman Sachs research indicates that by 2026, net equity supply in the U.S. stock market could return from negative territory to near zero—an indicator that has been negative since 2003 and was one of the most important structural supports for the past two decades of the bull market.

The core logic of this shift is: the massive capital demand driven by the AI arms race is forcing companies to shift from "buybacks and reducing float" to "large-scale issuance of shares and public fundraising."

The era once called "stock market QE" and de-equitization is ending, and a new "re-equitization" era is beginning. This means that the supply-side variable, long neglected, will once again become a key factor influencing market direction.

Twenty years of "de-equitization": the longest-lasting tailwind for the U.S. stock market abruptly ends

Over the past nearly twenty years, a prominent structural feature of the U.S. stock market has been the continuous shrinkage of stock supply. The companies in the S&P 500 have collectively canceled nearly $12 trillion in market value through buybacks. Corporations have played the role of the largest buyers in the market, while many high-quality companies have chosen to remain private long-term, further constricting the pool of investable public stocks.

Former Citigroup strategist and "de-equitization" concept originator Robert Buckland compared this phenomenon to "quantitative easing in the stock market." He pointed out that the ongoing reduction in float has been a sustained factor supporting stock prices over the past twenty years.

However, this logic is being thoroughly overturned by the AI wave. According to Citigroup data, hyperscalers' net buyback scale has declined last year. StoneX Financial global macro strategist Vincent Deluard describes this shift as an evolution through three stages:

"Initially driven by profits and free cash flow, then borrowing, and now fully utilizing—cash flow, debt, and equity—all are being used."

Goldman Sachs research indicates that by 2026, net equity supply in the U.S. stock market could return from a sustained negative for over twenty years to near zero. Bespoke Investment Group macro strategist George Pearkes characterizes this as "end-of-cycle behavior," and frankly states, "From this perspective, it’s a rather negative indicator."

Super IPO wave: SpaceX leads, followed by OpenAI and Anthropic

Last week, SpaceX completed the largest IPO in history, raising $75 billion, with a 19% surge on its first day of trading. This is just the beginning.

Reports indicate that since the start of the year, about 160 companies have announced raising over $120 billion through IPOs, exceeding the total of the past two years. Including secondary offerings by already listed companies, the new stock supply in the first half of this year has surpassed $360 billion, the highest in five years.

Mega IPOs of OpenAI and Anthropic are expected to debut in the coming months. Ned Davis Research estimates that SpaceX, OpenAI, and Anthropic together could raise over $170 billion in the short term.

It is noteworthy that the initial issuance proportions of these three companies are extremely low—SpaceX sold less than 5% of its equity, below the typical 15-20% range for IPOs. Once lock-up periods expire and more shares enter circulation, the market will face a larger supply shock.

Ned Davis Research estimates that just a small portion of these three companies' shares pushed into the public market could offset an entire year's worth of buybacks in the S&P 500.

Blackstone President Jon Gray stated that the listings of SpaceX, Anthropic, and OpenAI mark that the IPO market has "truly found its footing," and revealed that Blackstone has already had three portfolio companies go public this year, with seven more in preparation.

Alphabet leads secondary offerings: tech giants shift from "largest buyer" to "largest seller"

Alongside the IPO wave, listed tech giants are also engaging in large-scale secondary offerings.

Alphabet is a prime example. The parent company of Google was long the biggest repurchaser of its own stock, but now, after raising funds through debt to expand AI, it is planning to issue up to $85 billion in shares, potentially one of the largest secondary offerings in history. Meta and other companies are also evaluating equity financing to support their AI expenditure plans.

The driving logic behind this shift is the change in relative financing costs. Currently, the S&P 500's P/E ratio is about 25, a rare high in this century, meaning equity financing has become relatively cheaper compared to debt.

Since the Federal Reserve pushed interest rates to a twenty-year high in 2023, the advantage of stock yields (inverse of P/E) over bond yields has continued to widen. Even as the Fed began cutting rates later, this pattern has not fundamentally changed. Aptus Capital Advisors portfolio manager John Luke Tyner bluntly states:

"It seems many are using market financing, and they are likely doing so not because they think their stocks are cheap."

Who will take the other side? Retail investors and money market funds are key variables

Faced with massive supply, the most critical question is: who will buy?

Currently, optimism still dominates. Bloomberg reports that retail trading volume accounts for about one-fifth of total U.S. stock trading, doubling since 2010. SpaceX allocated up to 20% of its IPO to retail investors, above the usual range.

Man Group chief market strategist Kristina Hooper summarizes current market sentiment as "FOMO (fear of missing out) and fear coexisting, with FOMO often prevailing."

The enormous $7.9 trillion in money market fund assets is also seen as a potential source of demand. Investors say it’s still unclear when this flood of equity and debt issuance will start to cause market distress.

However, the concentration of demand has raised concerns among some market participants. Jim Bianco, president of Bianco Research, points out:

"There is unlimited investor appetite and financing willingness in AI, but outside of that, most companies are basically standing still."

Kevin Foley, co-head of global investment banking at JPMorgan, also admits that current capital market activity is "quite concentrated," and warns, "The world is changing rapidly, and risks remain unresolved."

Historically, large-scale equity issuance has often accompanied major investment booms—railroads, canals, telecommunications—all the same. But history also shows these waves often end in bubbles.

BCA Research chief U.S. equity strategist Noah Weisberger, after studying 40 years of market history and about 12k IPOs, found that within 12 months after large IPOs, the S&P 500 tends to underperform other periods, with median gains of only 8%, and in about 20% of cases, even negative returns.

"An upcoming wave of extremely large IPOs will only heighten concerns. These are not small issues that markets can quickly digest; they could become substantial obstacles."

ValueWorks hedge fund founder Charles Lemonides compares the current situation to the late 1920s and the 1990s, when waves of innovation fueled speculative stocks and large-scale financing—"During the rise, companies competed fiercely for funding, and investors competed to give it—like a gold rush, everyone wanted in."

Robert Buckland openly states that he has been waiting for the moment when equity supply truly starts to volume up, viewing it as a signal to counter this bull market. "Now, it’s really starting to volume."

AllianceBernstein institutional solutions co-head Inigo Fraser Jenkins takes a relatively moderate stance, believing that the rise in equity issuance should be understood as one of the risks suppressing future returns and increasing volatility, rather than a fundamental shift in market structure. "It somewhat narrows the path to success."