OpenAI joins the IPO train, as US markets get more dominant

We start trading on Tuesday with another IPO story, OpenAI has confidentially filed for an IPO, alongside SpaceX and Anthropic. The OpenAI news means that we will hear more about how much revenue it is generating and how much cash it is burning through in the coming weeks. 2026 is set to be the ‘brat summer’ for these AI names, with their soaring valuations and big promises for how AI will change the world and send their revenues soaring.

Thew news from OpenAI comes days before SpaceX is set to list. The company will start trading on the Nasdaq this Friday, and the company’s valuation is expected to hit $1.75 trillion. Wall Street bankers and CEOs are beside themselves with excitement about these mega cap listings, however, on the street there is some caution setting in. Although we fully expect the SpaceX IPO to be successful, the IPO itself is probably the least interesting event, what is far more interesting will be SpaceX’s future earnings reports, which will need to be big to justify a valuation that is 56 times forward earnings.

OpenAI lays out plans for the future, but will they generate revenue?

OpenAI is currently valued at $850bn, the ‘baby’ of the group, since Anthropic is now valued ahead of OpenAI at $965bn. The company laid out the ‘third phase of OpenAI’ on Monday and said that it is undertaking research into artificial general intelligence, and looking at becoming a ‘product company’. The latter is interesting for investors, since it would be a major potential source of future revenue. Although it is early days, if OpenAI launches its own product range, it could become a major competitor to Apple and Google, and their share prices are worth watching closely on Tuesday.

Apple did not join in the stock market recovery on Monday, as this was dominated by AI names. Apple also looks set to open lower later today, as the recovery rally loses some steam. A potential AI competitor in the tech consumer product space could also weigh on Apple’s share price later today, especially after it announced the launch of its new Siri voice assistant, which comes with new AI features.

AI listings to increase US stock market dominance, and concentration risk

Overall, the summer of IPOs is going to do two things; 1, make the US stock markets even bigger, as the US becomes the global AI centre, and 2, increase concentration risk in US markets even more.  Whereas up until now, the AI trade has been about the compute and hardware companies that are necessary for the infrastructure build out that will enable AI, the IPOs of SpaceX, Anthropic and OpenAI, are less about buying into a business and more about buying into an idea.

SpaceX IPO; how to buy an idea, rather than a business

The ideas of AI sells, that is why SpaceX, Anthropic and OpenAI are rushing to list, the question is, will these ideas turn into revenue streams before investors lose patience? This is not a question for now, but it could pose a risk to market stability down the line, if the ‘idea’ of AI does not live up to expectations.

US stocks staged a comeback after Friday’s sell off. The Nasdaq rose by 1.2%, and the S&P 500 was higher by 0.8%, as the tech sector jumped 2.2% on Monday. There are more gains for US futures this morning, and Asian stocks had a strong recovery. Monday’s recovery rally has partly reversed Friday’s sell-off, but US stock markets are still lower on a weekly basis, so if the S&P 500 is to return to its winning ways then this recovery still has some way to go.

FTSE 100: healthcare in focus

The FTSE 100 will also be in focus this morning, Futures suggest another positive open for the UK index, and the healthcare sector is worth watching, after AstraZeneca released positive results about its weight loss pill. Also, GSK announced that it is in talks to buy cancer biotech firm Nuvalent for $9bn, its biggest acquisition for more than a decade. Both companies have seen their share prices rise in the past year, GSK’s is higher by more than 26% under its new boss.  This deal news reinforces the FTSE 100’s diversification benefits, especially compared to the tech heavy US indices.

Oil prices fall, as fragile ceasefire holds

The oil price also helped to boost the market mood at the start of the week, it gave up early gains and ended below $95.00 per barrel. Iran and Israel have both claimed that they will stock attacking each other, and for now the fragile ceasefire between the US and Iran remains in place. The oil price is falling once more on Tuesday, Brent crude is now below $94 per barrel. However, there could be a cap on the downside for the oil price, as we are starting another week whereby the Strait of Hormuz remains closed, and peace talks seem elusive.

Donald Trump seems confident that a deal will be reached, and he said late on Monday that he does not expect Israel will go back to war with Iran. Although the President has been promising a deal with Iran for months now, we think that the market could be placated by his words, and we may see the oil price remain contained, and stocks continue to recover.

Markets wait for US CPI and SpaceX IPO

We expect a quiet Tuesday for markets, as we lead up to some major events including US CPI and the SpaceX IPO later this week. US inflation data on Wednesday is expected to rise to 4.2% in May, up from 3.8% in April. This is a major risk event for markets, as it will set the tone for next week’s Federal Reserve meeting.

A reading above 4% for CPI keeps Kevin Warsh’s back against the wall, he won’t be able to advocate for rate cuts when inflation is over double the Fed’s target rate and jobs growth is strong. However, it is worth noting that one third of jobs growth in the US last month came from local government, and this sector may not persist in hiring at a robust level. Thus, the Fed may want to see further evidence of strong jobs growth before signaling that rate hikes are on the cards anytime soon.

The prospect of high inflation is keeping upside pressure on the dollar, and USD/JPY remains above 160.00.