What the IPO Boom Tells Us

IPO market is booming again. But is the surge in activity a sign of market strength or a warning that the market is at its peak? I'm Allison Nathan, and this is Goldman Sachs Exchanges. Today, I'm sitting down with my colleague in Goldman Sachs Research, Ben Snyder, chief US equity strategist. Ben, welcome back to Exchanges.

Good to be with you.

So Ben, let's get into it. I know you're getting lots of questions about this topic. We've obviously seen years of muted issuance, and that was a topic for quite some time, but IPO activity has clearly accelerated. So just give us the context, put some numbers on it for us. How much growth have we seen?

We're just about halfway through the calendar year, and so far, we've seen just shy of 50 US IPOs. That's about double what we saw at this point last year, and it's the largest number of deals at this point in the calendar year since 2021, which one of the largest IPO years on record. So we are definitely seeing a recovery. What's notable, though, is that the size of the deals on average has been very large, and so in dollar terms, we're already basically tied with 2021 for a record year of about $120,000,000,000 in issuance.

Right. So number of deals is up tremendously as is the size of those deals. So pretty impressive stuff we're seeing. What's driving this activity? Talk us through that.

So one, as you noted, is we're recovering from a four year stretch of very muted activity. We had an IPO boom in 2021. Valuations were elevated. We had the sharpest Fed hiking cycle on record, and that led to a few years of recovering valuations. And so to some extent, what's happening is just a normal recovery. But on top of that, we have, of course, some very large companies that are coming to market, and we have this immense desire for capital to help fund the AI boom. And putting all that together is the reason we're seeing such a strong acceleration in deal volume.

But it's been concentrated. I don't wanna put words in your mouth, but it's been concentrated in certain sectors. Obviously, technology, the AI related theme. Is it as narrow as I think it is in terms of that sector?

In number of deals, we've seen pretty diverse array. There's been health care deals. There's been deals in the industrial space. But in dollar terms, you're right to point to AI as the key driver.

And so if we think about the AI narrative and how much momentum it's had, if that momentum cools, what do you think happens to the IPO pipeline?