A Catalyst for the AI Bubble Break

GMO

Ben Inker

Research

7 Pages

GMO argues that a surge in new equity supply, rather than disappointing fundamentals, could be what finally deflates the AI boom. The authors examine how a wave of mega IPOs could flip shrinking share counts into rapid supply growth that a market dominated by passive funds may struggle to absorb. Only about 30% of invested dollars now trade opportunistically.

Key Takeaways

IPO Wave Looms: Anticipated Anthropic and OpenAI listings together could equal roughly 5% of investable US market cap.
Supply Pressures Prices: Historically, each 1% rise in equity supply has lined up with about a 4% decline in market value over 12 months.
Active Share Shrinking: Active share of S&P 500 benchmarked funds fell from near 80% in the 1980s to about 60% today.
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