Cerebras IPO Sparks Hype for SpaceX, OpenAI, Anthropic

Cerebras Systems’ robust IPO this week offered investors a glimpse into the surging artificial intelligence sector. However, it also underscored the persistent challenge for companies outside the direct AI narrative to command Wall Street’s sustained attention.

Shares of the AI chipmaker saw a remarkable surge of nearly 70% in their market debut on Thursday, propelling the company’s market capitalization to approximately $95 billion. This achievement places Cerebras among an elite group; only two tech companies in U.S. history have achieved valuations of $100 billion or more on their first day of trading: Alibaba and Facebook.

Furthermore, Cerebras marks the largest IPO of the year and stands as the most significant offering for a U.S. tech company since Uber’s market entry in 2019. This exceptional debut might suggest a thawing of the tech IPO market, which has been largely stagnant for over four years. Yet, the landscape is dominated by the anticipation of even larger players.

The primary hurdle for many companies in the IPO pipeline is their inability to compete with the gravitational pull of tech giants like SpaceX, OpenAI, and Anthropic. These three entities, each valued near or exceeding $1 trillion, are reportedly in various stages of IPO preparations. SpaceX is anticipated to file its public prospectus imminently, with OpenAI and Anthropic eyeing debuts later this year. Their potential offerings are poised to eclipse any previous listings, further emphasizing the relative scale of other multi-billion dollar pre-IPO companies.

“It’s incredibly difficult to focus on anything other than the potentially trillion-dollar IPOs that are theoretically on the horizon within the next year,” noted Sam Lessin, a partner at Slow Ventures, in a recent discussion.

The market has presented significant headwinds for emerging technology companies since early 2022, a period marked by soaring inflation and rising interest rates that led investors to shy away from risk. While sporadic periods of activity have occurred, U.S. venture-backed exit value last year plummeted to less than a third of its 2021 peak, according to the National Venture Capital Association’s annual yearbook. Tech IPOs this year have been virtually nonexistent.

Cerebras’ offering provided investors with one of the initial opportunities to participate in the AI boom through a pure-play tech stock, especially as much of the recent activity has been confined to the private market. Prior to Cerebras, the most significant offering in the AI infrastructure space was from CoreWeave, which went public in March of last year and is now valued at over $58 billion.

Lise Buyer, founder of IPO advisory firm Class V Group, described late-stage startups as being in a phase of “pragmatic preparation,” actively seeking indicators of market receptivity. However, she emphasized that the market requires more data points before it can be definitively declared open for a sustained wave of new listings.

The central dilemma for many high-valuation startups extends beyond the overwhelming focus on AI models. These companies are also grappling with the reality that AI is the primary driver of market excitement. The vast majority of companies in the pre-IPO arena were established well before the advent of ChatGPT and the subsequent generative AI revolution.

“It’s a story of haves and have-nots,” observed Jai Das, a partner at Sapphire Ventures. “If you possess a compelling AI narrative, you stand a chance of success. Conversely, a SaaS company lacking significant AI traction will face considerable challenges in attracting public market interest at this juncture.”

Companies operating within the Software-as-a-Service (SaaS) sector have been particularly vulnerable in the public markets, driven by concerns that their existing products might be partially or wholly supplanted by advanced AI models and agents.

For so-called “AI-native” companies, Das suggests that many may opt to postpone their public debuts as they continue to scale, or they might strategically wait to gauge investor appetite following the anticipated IPOs of OpenAI and Anthropic.

Rick Heitzmann, a partner at venture firm FirstMark, noted that companies preparing for IPOs often prefer to see others take the initial plunge, demonstrating that the market is indeed receptive. “This will encourage others to say, ‘Great, the conditions are favorable to proceed,'” he remarked.

While Cerebras’ successful IPO is a positive development, it represents a unique scenario. The company has entered the market during a period of intense innovation in the semiconductor industry. Shares of established players like Intel, Advanced Micro Devices, and Micron have experienced significant growth, fueled by surging demand for chips integral to the entire AI ecosystem. Cerebras itself claims its Wafer Scale Engine 3 chips offer superior performance compared to graphics processing units from Nvidia, currently the world’s most valuable company.

Earlier this year, Cerebras announced a substantial $20 billion deal with OpenAI and an agreement with Amazon Web Services, underscoring its strategic importance and market traction.

The focus now shifts to SpaceX and Elon Musk’s ambitious plan to take his reusable rocket company public. In February, Musk orchestrated a significant merger of SpaceX with xAI, his artificial intelligence startup, in a transaction valued at $1.25 trillion. At such a valuation, SpaceX would instantly rank among the top 10 most valuable U.S. tech companies.

“No one wants to be caught in the gravitational pull of the SpaceX IPO,” commented Renos Savvides, head of equity capital markets at Neuberger Berman. “If you are a smaller IPO and your roadshow coincides with SpaceX’s, investor attention will inevitably be diverted.”