Riding the IPO Wave

For almost two decades, net equity issuance in the US equity market has been consistently negative. Companies have bought back significantly more of their own stock than they have issued, and this structural drain on supply has arguably been an underappreciated driver of the bull market. The other side of that equation, new listings and capital raisings, have stayed comparatively quiet. In 2026, that balance is being tested from two directions at once.

The Supply Side

The first direction is the AI build-out. US hyperscalers have been the most aggressive buyers of their own stock over the past decade. However, now this has fundamentally changed as spending on AI infrastructure now surpasses operating cash flow, forcing management teams to draw down their cash reserves and scale back buyback programs. The strain is spilling beyond internal cash flows too, with these companies issuing record amounts of debt, and in some cases new equity.

The shift on the supply side is just as clear. The same forces pushing public companies to raise capital are now driving the largest private companies towards listing. SpaceX has already listed, while OpenAI and Anthropic will both likely list at valuations approaching the trillion-dollar mark. The story is the dollar scale of these deals rather than their number: only around 40 IPOs have come to the US market year-to-date, well below the long-run average. These businesses now require so much capital that private markets can no longer fund them at the scale required, and public markets are the only pool deep enough.

With these levels of supply coming to market, net equity issuance will likely flip positive. Recent history tells us this is worth paying attention to. The last three instances where net issuance turned positive preceded severe market drawdowns. We are conscious of the parallel, but there are still good reasons to resist the conclusion that this signals an impending peak.

First, the companies coming to market are different in character. Prior booms were defined by speculative, pre-revenue businesses listing at stretched valuations. This cohort is the opposite – they are larger and more established, with genuine revenue bases and operating discipline built well before listing. Second, the market itself is far larger than it was at the dotcom peak, so even record-dollar listings drop into a much deeper base. Third, the earnings story still holds. Corporate profits remain the primary driver of prices, and upgrades are moving materially higher across the broader technology sector, not just the hyperscalers. And finally, demand is structurally deeper than in earlier cycles, with retail participation at an all-time high and institutional appetite showing no signs of abating.

On balance, we believe the current bull market can continue. The supply story is real, and the dynamics are worth monitoring closely, but they do not in isolation alter the underlying conditions that have supported the rally. Still, we will be watching a few factors closely as gauges of market health: appetite for successive large deals, the behaviour of incumbent technology names as new entrants arrive, whether AI spending translates into measurable earnings, and the pace of buyback recovery. A sustained deterioration across any of these would prompt a more material reassessment of our conviction.