SpaceX leads a $4 trillion IPO surge—can the market absorb it? Goldman Sachs: No problem. Bank of America: The bubble is nearing historic highs.

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The largest IPO wave in history is approaching, and whether the market can withstand it has led to completely opposite answers from two major Wall Street institutions.

Michael Hartnett, Chief Investment Strategist at Bank of America, recently said bluntly that the current market is experiencing "the biggest bubble since the railroad era" and warned that if SpaceX, OpenAI, and Anthropic—three companies with a combined valuation of over $4 trillion—list at once, it will massively drain market liquidity. Meanwhile, a Bloomberg report pointed out that SpaceX's IPO plans "could threaten the market’s very integrity."

However, Ben Snider, Chief Equity Strategist at Goldman Sachs, refuted this in a recent report, saying that corporate equity demand is sufficient to absorb record IPO supply and the market need not worry excessively.

These two entirely opposing judgments reflect deep divisions in the current market amid soaring valuations and tightening liquidity expectations, leaving investors facing a rare and directional dilemma.

BofA Warning: AI Concentration Nears Historic Extremes, Clear Bubble Signals

Hartnett noted in a recent report that if upcoming tech giants are combined with existing AI leaders, AI sector concentration will reach about 48%, surpassing the concentration levels of the "Roaring Twenties" of the 1920s, the "Nifty Fifty" in the 1970s, Japan's stock market bubble in the 1980s, and the TMT bubble in the 1990s. The only historical extreme not yet surpassed is the 63% market cap share at the peak of the 1880s railroad bubble.

Even so, Hartnett did not advise investors to reduce positions immediately. He gave two reasons: First, before the historic IPO window opens, no one will proactively cut long positions; second, the real tightening signal will appear only after CPI rises to 4%-5% in the coming months, which will then herald a historic market correction.

Hartnett’s logic implies a clear transmission chain: persistently rising inflation will force the Fed out of "hibernation;" even if the new Fed chair Warsh resists, tightening policy will eventually come. At that point, the near-simultaneous listings of SpaceX, OpenAI, and Anthropic will prompt investors to sell existing holdings to raise cash, further draining the market's "dry powder."

Goldman’s Rebuttal: Supply and Demand Calculations Show Share Buybacks Can Offset IPO Pressure

Goldman’s Ben Snider quantitatively refuted such concerns one by one from both supply and demand sides in the latest "Weekly Kickstart" report.

On the supply side, Goldman sharply raised its forecast for total IPO financing in 2026 to $225 billion, significantly higher than the previous $160 billion—setting a historic high. Adding secondary offerings, convertibles, and SPACs, the total size of corporate equity issuance in 2026 is expected to reach $675 billion. However, Goldman also noted that as a percentage of the Russell 3000 market cap, this is only about 1%—in line with the 2015-2019 annual average, not exceeding historical norms.

On the demand side, Goldman expects U.S. companies to execute over $1.3 trillion in share buybacks in 2026, far exceeding the $1.1 trillion in equity issuance, leaving net demand positive. Notably, although hyperscaler buybacks plummeted 64% year-on-year in Q1, buybacks in sectors benefiting from bank and AI capex—like semiconductors—are filling the gap. NVIDIA, after its latest earnings, authorized an additional $80 billion in buybacks; U.S. corporate buyback authorizations YTD have hit a record $860 billion, up 18% y/y.

In addition, M&A was cited by Goldman as an extra source of demand. Year-to-date, the value of U.S. M&A deals has approached $900 billion (+48% y/y), with about 70% paid in cash. Households and foreign investors are also considered potential incremental buyers—foreign holdings of U.S. stocks have risen from 6% in 1995 to 18% now.

Index Inclusion Rule Changes: Passive Funds May Accelerate IPO Absorption

Another variable worth noting in Goldman's report is recent adjustments to index inclusion rules. FTSE Russell has approved changes to its U.S. index methodology allowing for quick addition of large IPOs, and the Nasdaq-100 has already made similar adjustments. The consultation period for S&P Dow Jones Indices’s IPO treatment just ended last week.

This means that once megacap IPOs like SpaceX finish listing, passive funds will be forced to rapidly build positions, creating considerable compulsory demand and partially offsetting concerns about oversupply.

However, Goldman also acknowledges that even with initially small floats, subsequent lockup expirations can’t be ignored. Since 2003, 14 large IPOs listed with under 10% float saw their free float jump to 28% after 6 months and 46% after 12 months, on average.

Based on this, Goldman estimates the batch of recent and upcoming IPOs will release about $500 billion in additional tradable shares by 2026, and even more by 2027.

Slowing Buyback Growth and Leverage Build-up Pose Risks

Goldman’s optimism is not without contradictions. The report shows that as S&P 500 companies’ capex growth exceeded 30%, free cash flow was heavily consumed and buyback growth has obviously slowed—Q1 only grew 4% y/y, and Goldman forecasts just 3% growth for the full year. The S&P 500’s net buyback yield over the past 12 months has dropped to 1.9%, below the 2.4% median since 2005, and the index divisor (a proxy for share count) has ticked upward over recent quarters.

Goldman’s own data also shows that 2026 net corporate equity demand (buybacks minus issuance) will be at a 20-plus-year low, only slightly better than the negative range seen in 2003 and earlier years.

Also noteworthy, Goldman is the lead underwriter for SpaceX’s IPO and could also manage the listings for OpenAI and Anthropic. With such strong interests, its optimistic post-IPO outlook naturally sparks doubts about its objectivity.

Another current market risk is that the rise in prices highly depends on leverage—investors are piling into call options, especially on leveraged single-stock ETFs, which have hit record highs. With market pricing close to "perfection," even a slight negative shift in net supply/demand could trigger an outsized market correction.

Risk Disclaimer and Liability NoticeThe market has risks; investment requires caution. This article does not constitute personal investment advice nor considers individual users' special investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their specific circumstances. If you invest accordingly, you are responsible for any risks. ```