SpaceX, Elon Musk’s rocket company, began trading this week after raising $75bn in the largest initial public offering in history. The IPO, which priced shares at $135 each, gave the company a valuation of $1.77tn, placing it among the 10 most valuable public companies globally.
The offering is the first in a slate of AI-sector listings expected this year. Anthropic and OpenAI have filed paperwork for their own IPOs, which would add two multitrillion-dollar AI companies to major U.S. stock indices.
In an analysis for The Guardian published Friday, journalist Eduardo Porter argued that the cascade of listings will force the stocks of these companies into the portfolios of ordinary Americans, whether they want exposure to the sector or not. “Skeptical though they may be, they are about to get more AI rammed down their throats and stuck into their pension plans and their investment portfolios,” Porter wrote, citing the mechanics of index fund investing.
He noted that index funds, a staple of 401(k) retirement plans, are required to buy stocks in proportion to their weighting in benchmarks like the S&P 500 and the Nasdaq. Changes to rules at the tech-heavy Nasdaq and the FTSE Russell have been made to fast-track listings of companies like SpaceX, Porter reported. The S&P 500, the most widely tracked index, currently requires companies to post a profit and wait roughly a year before inclusion.
Porter cited a Quinnipiac University poll that found eight in 10 Americans are concerned about artificial intelligence, and seven in 10 believe it will reduce the number of available jobs. The poll found that only a third of respondents reported being excited by AI.
The so-called “Magnificent Seven” — Nvidia, Alphabet, Apple, Amazon, Microsoft, Meta, and Tesla — already represent more than a third of the S&P 500’s total market value. The S&P 500 index stood at 7,394.30 on June 12, according to FRED data. The Nasdaq Composite index was at 25,809.66. Porter reported that the Nasdaq had fallen more than 4% recently as indications of a robust labor market raised the prospect of further interest rate increases by the Federal Reserve.
Porter raised governance concerns about the concentration of control. Musk, he wrote, will have sole control over SpaceX, allowing him to “follow his baser instincts wherever they lead.” SpaceX, which makes most of its revenue from selling internet access, has not yet posted a profit and is financing Musk’s ambitions to launch datacenters into orbit.
While the prospect of AI driving broad economic productivity gains remains an aspiration, Porter argued that the balance of risks leans toward scenarios in which a financial bubble built on AI enthusiasm collapses. “The great financial crisis of 2008 will look like a cartoon compared with what will befall the finances of most Americans if the AI dream tucked into their investments turns into a nightmare,” he wrote.