Is the Surge in US IPOs a Warning Sign for Investors?

After several relatively quiet years, The U. S. IPO market has reopened in a big way in 2026. Issuance so far this year is already at a record high. But this resurgence has raised two big questions. First, is this a late cycle warning sign? And second, can the market actually absorb all this new stock? So the real question is, how worried should investors actually be? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Each month, I speak with investors, policymakers, and academics about the most pressing market moving issues for our top of mind report from Goldman Sachs Research. In a rec

The total amount of proceeds raised this year is setting a record, but the number of companies going public has been still fairly modest. Since the Internet bubble burst, the number of operating company IPOs averaged only a little over 100 companies per year as compared with over 300 companies per year in the 80s and 90s. And I think the two main reasons why there continues to be a relatively modest number of IPOs are first, the big expansion of venture capital and private equity and other sources of equity capital for private companies. Hundreds of unicorns are staying private year after year

Lamont also says that it's hard to characterize the current activity as an IPO wave, but he sees signs that an IPO and broader equity issuance wave may be forming.

In the past three years, we have been in the opposite of an IPO wave. We have been in an IPO drought. And you can measure that in two ways. You could do it by the number of IPOs, just how many IPOs are occurring every year, or you could look at the dollars of IPOs. What is the total amount of dollars raised? So on either of those two metrics, dollars or numbers, we've been in a drought. So this year, 2026, we have been still in a drought if you measure by number of IPOs. If you look at the number of IPOs, in the real big IPO waves, such as nineteen ninety nine or twenty twenty one during COVID

But with 2026 already a record issuance year, is this a red flag for the equity market? Ritter doesn't think so. So, Jay, you and other economists have found that past IPO booms have often preceded market downturns. So is that a reason to worry?

There is evidence that high new issue volume is a predictor of low future market returns. But like most indicators, it works about 52% of the time. If it was easy to predict markets, there'd be lots of trading strategies that reliably made a lot of money. So there is some predictability there. But as with other measures, it's very limited predictability.

But Lamont is more cautious, viewing an IPO wave as one of the, quote, four horsemen of a market bubble. Here, he explains why.

If there is a wave of issuance again, it hasn't happened yet. But if there is a wave of issuance, that would be a symptom to me that the market is overvalued, and we're in a bubble. And the reason is that firms are smart, and firms want to sell equity when equity is overpriced. If you're trying to diagnose whether the stock market is overpriced, there's many signals you could use. Just one symptom is not enough. I would say this issuance symptom or signal is a strong signal, and it worked well in 2021. There was a huge wave of issuance, including IPOs and SPACs, and that was a great time to un

But could the issuance as a bubble signal be less reliable if companies are raising equity to fund investment for a transformative technology like AI?