SpaceX IPO and the AI frenzy: what top VCs are watching

SpaceX is reportedly eyeing a $1.75 trillion valuation at its initial public offering (IPO). This liquidity event could potentially influence the timing of other artificial intelligence companies, such as OpenAI and Anthropic, which are potentially not far behind. However, some market observers warn that SpaceX could soak up so much public market capital that it hurts other companies attempting to go public in its wake.

This potential wave of large-scale initial public offerings (mega-IPOs) comes during a period of capital concentration in the private markets. Speaking at an event in Athens, Greece, Niko Bonatsos, Managing Director at Verdict Capital, noted that the current venture landscape is experiencing groupthink. The concentration of capital is highly skewed:

• Three-quarters of all venture capital raised over the last year went into just five companies.
• This leaves other startups competing for the remaining pool of funds.

This concentration of capital has distorted how deals are priced and how startups report their performance. Ben Blume, a Partner at Atomico, which invests from a $500 million fund, pointed out the difficulty of competing against funds of $10 billion or $15 billion looking at the same opportunities. To justify high valuations, some founders have engaged in “shady behavior” regarding metrics reporting. Specifically, some startups are displaying a “grifting mentality” when reporting Annualized Recurring Revenue (ARR)—the key metric for software-as-a-service business predictability—by annualizing single-day revenue spikes or counting free tokens as revenue. “If you’re an AI-native founder or a company in the American dynamism space right now, you can live life in the fast lane,” Bonatsos observed, referring to the investment theme focused on physical-world technology and national interests. Meanwhile, Elon Musk recently revealed he has an option to acquire AI coding startup Cursor for $60 billion.

Despite the current frenzy, investors anticipate a shift. Andreas Stavropoulos, a Partner at Threshold Ventures, asserted that there will be a correction that pushes some capital back out of the market, as short-term results struggle to match current optimism. Bonatsos, reflecting on his 17 years in Silicon Valley, noted that while bad actors will inevitably be written off, the venture model remains resilient because the right investment can return 100x.

Why it matters

The potential SpaceX IPO serves as a bellwether for the broader AI investment cycle, highlighting the tension between massive capital concentration and the sustainability of current valuation metrics.