For much of the past two decades, one factor that has quietly helped support the stock market has been a limited supply of shares. Companies have spent trillions of dollars buying back their own stock, while relatively limited IPO activity has kept new supply in check. At the same time, money has continued flowing into retirement accounts, index funds and ETFs. More money chasing a relatively limited supply of stocks has generally created a favorable backdrop for markets.

That dynamic has begun to change. After several relatively quiet years, the IPO market has reopened in a meaningful way. Through late August, traditional U.S. IPOs had already raised roughly $137 billion, approaching the full-year record set in 2021. The most visible example came in June, when SpaceX completed the largest IPO in history, ultimately raising approximately $86 billion. The pipeline behind it could be just as significant. Anthropic is preparing for a potential public listing as soon as this fall, while OpenAI has also confidentially filed for an eventual IPO.

The magnitude of the potential change is significant. Over the past 15 years, net U.S. equity issuance has frequently been negative because share buybacks have consistently outpaced new equity offerings. Forecasts point to a sharp reversal in 2026 and an even larger influx of equity in 2027, driven by the expanding free float from mega-cap IPOs.

SpaceX, OpenAI and Anthropic alone could eventually add trillions of dollars of market capitalization to U.S. exchanges. Initially, only a relatively small percentage of these companies will be publicly traded. However, that percentage typically increases over time as lockups expire and employees and early investors begin selling shares. Goldman Sachs estimates that the average free float of large IPOs can increase from less than 10% initially to roughly 46% after one year. This could create roughly $1 trillion of additional equity supply by 2027.

This matters because supply and demand still dictate market pricing. Every dollar allocated to newly issued shares of OpenAI or Anthropic is capital diverted from existing equities. A similar dynamic occurs when these companies eventually join major benchmark indexes: passive funds will become natural buyers, but they must trim existing holdings to fund the new additions.

There is another wrinkle to this dynamic. For years, investors who wanted exposure to artificial intelligence could not directly own OpenAI or Anthropic. Instead, they bought companies that benefited from their growth, including semiconductor manufacturers, cloud providers, data-center companies and other AI-related businesses. Once investors can own the AI companies themselves, some of that money could migrate away from the companies that previously served as proxies for the theme.

There is also an important connection between this new supply and the massive amount of money being spent on artificial intelligence. OpenAI and Anthropic require enormous amounts of computing infrastructure, while the largest public technology companies are simultaneously investing hundreds of billions of dollars in data centers, semiconductors, networking equipment and power. The capital required to build AI is becoming so large that companies are increasingly tapping every part of the financial markets. Morgan Stanley now estimates annual data-center capital spending could reach $1.3 trillion in 2027.

None of this is inherently negative. SpaceX demonstrated the depth of available demand when its $75 billion offering reportedly drew over $350 billion in orders.  A healthy IPO market also gives investors access to companies that have remained private much longer than previous generations of technology companies. The question is whether that buy-side appetite can keep pacing this surge in supply.

AI does not have to fail for this to become a problem. The technology could fundamentally transform the economy even as early buildout investments deliver disappointing returns. Data centers carry massive capital costs, hardware depreciates rapidly, and customer willingness to pay remains unproven. If monetization lags expectations, the capital required to sustain this buildout could dry up.

For now, the market remains eager to absorb new issuance. SpaceX’s successful offering highlights substantial capital waiting on the sidelines, though upcoming IPOs from Anthropic and OpenAI will offer a true test of sustained demand.

For the past few years, investors have focused primarily on AI’s massive demand for chips, power, data centers, and tech equities. Moving forward, the supply side of the ledger will matter just as much: the unprecedented volume of new equity entering the market and whether buyer appetite can absorb it.

The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. It is only intended to provide education about the financial industry. As always, please remember that investing involves risk of loss of principal and capital. Nelson Capital Management, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission. Advisory services are only offered to clients or prospective clients where Nelson Capital Management, LLC and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Nelson Capital Management, LLC unless a client service agreement is in place. Likes and dislikes are not considered an endorsement for our firm.