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Frenzy Could Be a Harbinger of a Stock Bubble Rampant enthusiasm is buoying tech shares to levels that defy gravity. Invest with caution, our columnist says. Listen · 10:21 min Video CreditCredit...Janet Mac Jeff Sommer By Jeff Sommer Jeff Sommer writes Strategies, a weekly column on markets, finance and the economy.
Amazing things are happening in technology, and ordinary investors are being invited to get a piece of the action. With the SpaceX market debut on Friday, the Anthropic and OpenAI initial public offerings in the pipeline, and the sizzling tech stocks already on the market, there’s no shortage of betting opportunities.
Elon Musk ignited a frenzy with his roadshow for SpaceX, promising a future of interstellar riches from artificial intelligence combining spaceflight, satellites and orbiting A.I. data centers. I watched his presentation at JPMorgan and was entranced. Who am I to say that cheap, virtually limitless A.I. generated from Earth’s orbit won’t happen just as Mr.
Musk says it will? Intellectually, I’m willing to contemplate the possibility that he is truly leading the world to a vibrant future, on this planet, on the moon and eventually on Mars. But from a purely investing perspective, I’m keeping my feet firmly on the ground.
As I’ve pointed out, the price being asked for SpaceX shares was exorbitant, and it rose even higher on its first day of trading. That said, the company’s stock might well rise further over the next few weeks, driven by sheer market enthusiasm. Mr. Musk reserved a double-digit percentage of the I.P.O. shares for “retail,” or ordinary, investors — as opposed to big institutions.
A retail allocation of 5 percent or less has been customary in most recent public offerings, according to Jay Ritter, an economist and I.P.O. expert at the University of Florida. But SpaceX’s price is so high that, for investors coming late to the party, the probability of a solid return in the next several years is low.
Historical data provided by Mr. Ritter bears that out. Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times. Thank you for your patience while we verify access.
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