With high-profile IPOs such as SpaceX, Anthropic, and potentially OpenAI drawing significant investor attention, clients may be wondering whether these opportunities belong in a portfolio. In this discussion, we examine how we evaluate highly anticipated public offerings and why innovation, growth potential, valuation, and risk must all be considered together. Most importantly, we discuss how these opportunities fit within the same disciplined investment process we apply to every investment decision.
Have a great weekend. See you soon.
FFR 293 – A Look at New Gen IPO’s
Upcoming IPOs: OpenAI, Anthropic, SpaceX & the Next Wave of Innovation
Paul:
Welcome to this week’s Financial Flash Report. Today, I’m here with my fellow Portfolio Manager, Mark Gierach to discuss one of the biggest questions we’re hearing from clients involving the next generation of technology IPOs.
SpaceX is preparing to enter the public markets, Anthropic has formally begun the process toward becoming a public company, and OpenAI appears to be moving in a similar direction.
These are companies that have captured enormous attention, and for good reason. They’re operating at the center of some of the most important technological developments taking place anywhere in the world today.
Naturally, investors want to know whether these companies represent compelling opportunities once they’re available to public shareholders.
Mark:
And before we even get into the investment discussion, it’s important to recognize why there’s so much interest.
What we’re seeing today isn’t simply another technology cycle.
Artificial intelligence is already beginning to change how businesses operate, how software is developed, how information is processed, and how productivity is created across the economy.
The pace of innovation has been remarkable, and in many ways it continues to accelerate.
Whether we’re talking about OpenAI, Anthropic, or other leaders in the space, there’s a strong argument that we’re still in the early stages of a technological transformation that could play out over many years.
Paul:
And that’s one reason we’re spending so much time studying these developments.
We believe innovation matters.
We believe productivity growth matters.
Historically, periods of meaningful productivity improvement have often created significant investment opportunities across multiple sectors of the economy.
What’s interesting is that the opportunity isn’t always limited to the companies generating the headlines.
Sometimes the beneficiaries are suppliers, infrastructure providers, or businesses that enable the broader trend.
And that’s certainly something we’re seeing with artificial intelligence.
Mark:
Absolutely.
When most people think about AI, they naturally focus on companies like OpenAI or Anthropic.
But AI requires an enormous ecosystem to function.
It requires semiconductors.
It requires networking equipment.
It requires data centers.
It requires cloud infrastructure.
It requires cybersecurity.
And increasingly, it requires massive amounts of energy.
One of the most important investment themes developing alongside artificial intelligence is the growing demand for power generation, transmission infrastructure, grid modernization, and energy reliability.
If AI adoption continues at the pace many expect, the energy requirements behind that growth could become every bit as important as the software itself.
In many ways, the AI story is also an infrastructure story.
Paul:
That’s a great point.
And it highlights something we often discuss with clients.
Major technological shifts rarely create just one winner.
They tend to create entire ecosystems of opportunity.
The internet created opportunities in software, networking, semiconductors, communications infrastructure, and countless adjacent industries.
Artificial intelligence may ultimately follow a similar path.
That’s one reason we’re constantly evaluating not only the companies driving innovation, but also the businesses enabling it.
Mark:
At the same time, it’s important to recognize that the IPO landscape today is very different from what it was twenty or thirty years ago.
Many of today’s most successful companies remain private much longer than previous generations of businesses.
Large pools of venture capital, private equity capital, sovereign wealth capital, and institutional investment have allowed companies to raise enormous amounts of money without entering public markets.
As a result, a substantial portion of the early value creation often occurs before public investors have the opportunity to participate.
Paul:
And that’s neither good nor bad. It’s simply the reality of today’s market structure.
It means investors evaluating these IPOs are often looking at businesses that are already established, already widely followed, and already carrying significant valuations.
The questions become a little different.
How profitable can these businesses become?
How much capital will they require?
How durable are their competitive advantages?
And what expectations are already reflected in the price investors are being asked to pay?
Those questions ultimately matter just as much as the technology itself.
Mark:
Artificial intelligence is a good example.
The technology is clearly powerful.
The adoption curve appears significant.
But investors are still working to understand what the long-term economics of the industry will look like.
Will these businesses eventually resemble highly profitable software companies?
Will infrastructure costs remain a meaningful constraint?
How will competition evolve?
What will long-term margins look like?
Those are important questions because even outstanding businesses can produce disappointing investment results if expectations become disconnected from reality.
Paul:
The same framework applies to SpaceX.
It’s difficult to overstate what the company has accomplished.
From launch services to Starlink to defense and communications infrastructure, the opportunity set is enormous.
But investors still need to understand the relationship between growth, economics, valuation, and risk.
Those are the same questions we would ask about any investment opportunity, regardless of industry.
Mark:
Ultimately, that’s how we think about this next wave of innovation.
We’re not interested in ignoring transformational trends.
Quite the opposite.
We want to understand them.
We want to identify where value is being created.
We want exposure to businesses that are benefiting from powerful long-term changes in technology, productivity, infrastructure, and economic growth.
But we also believe successful investing requires discipline.
Innovation matters.
Growth matters.
Quality matters.
Valuation matters.
And over time, the most attractive opportunities are often found where those factors come together.
Paul:
And that’s exactly how we’ll continue evaluating opportunities like OpenAI, Anthropic, SpaceX, and the broader ecosystem developing around them.
The technologies may evolve.
The companies may change.
But our focus remains the same: identifying high-quality opportunities, understanding the risks, and helping clients participate thoughtfully in the long-term trends shaping the future economy.
Thank you for joining us, and we look forward to continuing these conversations as this next chapter of innovation unfolds.
Disclaimer:
Stiles Financial Services is an SEC registered investment adviser based in Minnesota. Information presented is for educational purposes only and does not constitute an offer or solicitation to buy or sell any securities or investment strategies. Investments involve risk and are not guaranteed. Past performance is not indicative of future results.
