
“The stock market is a device for transferring money from the impatient to the patient.” –Warren Buffett
“Don’t just do something, stand there!” – Jack Bogle
Chinese AI model developer DeepSeek sent shockwaves this week as investors realized AI compute may soon be a lot cheaper than previously thought.
After a steep drop on Monday, the Renaissance IPO Index bounced back to finish the week up +0.7%, beating the S&P 500’s -1.0% loss. The winners this week were the investors who ignored (or bought into) that early volatility.
Remember that volatility is not risk. Keeping cash under your mattress has no volatility, but a diversified portfolio builds wealth. Long-term IPO investors have the luxury of ignoring day-to-day price swings, even when media platforms explain and then amplify the panic du jour.
Many investors learned this week that AI tech is not a monolith, but an interwoven supply chain. The market is changing rapidly and there will be winners and losers week-to-week, but in the long run, far more AI winners than losers. The democratization of AI will also be a boon to non-AI companies that leverage this technology, i.e. the coming “AI-ification” of global industry.
The commoditization of AI might be worrisome for the “incumbents,” if the addressable market wasn’t so large.
On that point, OpenAI is now in talks to raise $40 billion at a valuation of $340 billion.
In other words, billions more than all US IPOs raised last year, combined ($30B).
We saw some of the above dynamics in the IPO Index this week. AI infrastructure plays Credo Technology (-13.0%) and Astera Labs (-12.2%) fell from their lofty heights. Companies in the AI data and application layer fared better, including Tempus AI (+11.7%) and Reddit (+9.4%). The week’s top performer, solar energy play Nextracker, jumped +23.0% on a classic earnings beat-and-raise.
Back to this past week’s IPOs. Five new stocks averaged a solid +20% from offer. The week’s largest deal, US pork producer Smithfield Foods (Nasdaq: SFD), slashed its price in order to show upside next to its closest peers, and gained +7.5%. The biotech space got a much-needed win as obesity drug developer Metsera (Nasdaq: MTSR) priced up and popped +47%. Insulin device developer Beta Bionics (Nasdaq: BBNX) had a similar gain.
One sizable deal is on the calendar for next week. Cement producer Titan America (NYSE: TTAM) is raising about $400 million in a carve-out from a public parent. Several more deals can launch on Monday, notably cybersecurity play SailPoint (Nasdaq: SAIL), which had been public until a 2022 PE buyout.
IPO watchers are still waiting for a big VC-backed tech offering to kick things off, but those types of deals typically start to pick up in March, so they can be valued on next year's estimates.
Take care,
Bill Smith
CEO and Founder
Renaissance Capital
Biggest price changes through
Jan 31st
in the
Renaissance IPO Index
|
||
---|---|---|
Top 5 | ||
Nextracker | NXT | 23.0% |
Tempus AI | TEM | 11.7% |
RDDT | 9.4% | |
CAVA Group | CAVA | 8.1% |
Klaviyo | KVYO | 5.4% |
Bottom 5 | ||
Credo Technology Group Holding | CRDO | -13.0% |
Astera Labs | ALAB | -12.2% |
TPG | TPG | -3.0% |
OneStream | OS | -1.9% |
Arm Holdings | ARM | -1.8% |
Sectors | ||
Industrials | 6.7% | |
Health Care | 6.3% | |
Consumer Discretionary | 3.1% | |
Consumer Staples | 2.5% | |
Real Estate | 0.1% | |
Financials | -0.4% | |
Technology | -0.7% |
Renaissance IPO ETF (NYSE symbol: IPO) tracks the Renaissance IPO Index
The Renaissance IPO Index returned 0.7% last week vs. -1.0% for the S&P 500.