Investors are eagerly awaiting the initial public offerings (IPOs) of a trio of companies at the forefront of the booming artificial intelligence (AI) sector: SpaceX, OpenAI, and Anthropic. As the world becomes increasingly fascinated with AI technology, these companies are gearing up to make a significant splash in public markets.
SpaceX is looking to make history with what is expected to be the largest IPO ever, tentatively scheduled for June 12. Meanwhile, OpenAI is projected to follow suit later this year or by early 2027. Anthropic, fresh off a remarkable $65 billion funding round, has also filed for its own IPO. These developments have caught the attention of investors, many of whom view the prospect of owning shares in such innovative firms as an attractive opportunity.
For those looking to invest, experts suggest a more measured approach. Instead of scrambling to acquire shares on their debut day or buying them individually, investors might consider a more diversified strategy. Index-tracking exchange-traded funds (ETFs) such as the Vanguard S&P 500 ETF or the Vanguard Total Stock Market ETF could serve as a safer, more comprehensive means to gain exposure to this new wave of tech stocks.
Amid the excitement, there has been some discussion about how quickly these companies might be added to major indexes. Recently, S&P Dow Jones Indices confirmed that it would not make any changes to its rules that would allow companies like SpaceX to be fast-tracked into the S&P 500. According to these rules, IPOs must be traded on an eligible exchange for a minimum of 12 months before they can be considered for inclusion.
Conversely, the Nasdaq-100 and Russell 1000 have taken steps to allow faster inclusion of IPOs, which could enable investors to gain access to these high-profile stocks shortly after they hit the market. Funds that track these indexes or the overall market, like the Vanguard Total Stock Market ETF, provide a means for investors to participate without the risks typically associated with blockbuster IPOs.
Although the Vanguard S&P 500 ETF includes around 500 leading American companies, the Total Stock Market ETF features a broader array of approximately 3,494 companies, allowing for further diversification. Despite the notable difference in the number of holdings, both funds tend to deliver similar performance due to overlapping top holdings that significantly impact their overall share prices.
While the exact dates for when SpaceX, OpenAI, and Anthropic will find their way into these indices remain uncertain, investors seeking to mitigate risk while still gaining exposure may find that ETFs like VOO and VTI are wise choices.
It’s worth noting that before jumping into the Vanguard Total Stock Market ETF, investors should consider other high-growth opportunities. Analysts from The Motley Fool recently highlighted ten potential market leaders that could offer significant returns, suggesting that the Vanguard ETF was not among their top picks. The performance of select stocks that have been featured in similar recommendations demonstrates the potential for outsized returns, making a compelling argument for investors to remain vigilant about diversified strategies.
As anticipation builds for these imminent IPOs, the market will be watching closely to see how these prominent companies fare in the public eye.
