Cerebras' blockbuster IPO boosts hype for SpaceX and OpenAI, crowds out smaller players

Cerebras Systems made a significant splash in the stock market with its recent IPO, marking a pivotal moment for investors eager to engage with the burgeoning artificial intelligence sector. The AI chipmaker saw its shares soar nearly 70% on their debut, propelling the company's market capitalization to approximately $95 billion. This remarkable performance places Cerebras among an elite group, as only two technology firms have previously surpassed a $100 billion valuation on their first trading day in the United States: Alibaba and Facebook. This IPO stands out not only as the largest of the year but also as the most substantial offering from a U.S. tech company since Uber's debut in 2019. The excitement surrounding Cerebras is expected to invigorate the tech IPO market, which has remained relatively stagnant for over four years. However, the challenge for many upcoming companies lies in their inability to compete with heavyweight players like SpaceX, OpenAI, and Anthropic — all of which are valued at or near $1 trillion and are in various stages of preparing for their own public offerings. Investment expert Sam Lessin from Slow Ventures emphasized the overwhelming focus on these high-profile IPOs, stating, "It's very hard to care about anything other than the $3 trillion potential IPOs that, in theory, are going to happen in the next year." The landscape for emerging tech companies has been tough since early 2022, as rising inflation and interest rates have dampened investor enthusiasm for riskier ventures. Despite occasional bursts of activity, U.S. venture-backed exit values plummeted to less than one-third of the peak reached in 2021, according to the National Venture Capital Association. Cerebras offers one of the first opportunities for investors to tap into the AI boom through a tech stock, particularly as most activity has occurred in the private market. The previous significant IPO in the AI sector was CoreWeave, which went public last March and now boasts a valuation exceeding $58 billion. Lise Buyer, founder of the IPO advisory firm Class V Group, remarked that late-stage startups are currently in a phase of "pragmatic preparation," seeking indicators of market receptivity. However, she cautioned that more data points are needed before declaring the market fully open. Many high-valuation startups face a dual challenge: not only are they competing for attention against AI-centric entities, but they are also grappling with the reality that most were established before the generative AI revolution catalyzed by ChatGPT. Jai Das from Sapphire Ventures noted the stark divide in the market: "If you have a really strong AI story, you can go out; but if you're a SaaS company lacking AI buzz, you're going to struggle to attract public market interest right now." SaaS companies have been particularly affected, as concerns grow that their offerings may be supplanted by AI technologies. The current sentiment among many AI-native companies suggests that they may delay their IPOs as they scale, opting to observe the market response following the debuts of OpenAI and Anthropic. Rick Heitzmann from FirstMark highlighted that companies eyeing IPOs are inclined to wait for others to take the plunge, hoping to gauge market receptivity. Cerebras' timing is fortuitous, coinciding with a resurgence in silicon stocks, as shares of industry giants like Intel, AMD, and Micron rally on increasing demand for AI-related chips. Cerebras claims its Wafer Scale Engine 3 chips outperform Nvidia's graphics processing units, the latter being the most valuable company globally. Earlier this year, Cerebras secured a monumental $20 billion partnership with OpenAI and established an agreement with Amazon Web Services. As attention shifts to SpaceX and Elon Musk's plans for a public offering, analysts note that the merger of SpaceX with Musk's AI initiative, xAI, is valued at an astounding $1.25 trillion. This valuation would position SpaceX among the top ten most valuable tech companies in the U.S., creating a potentially overwhelming environment for smaller IPOs. Renos Savvides from Neuberger Berman remarked, "If you're a smaller IPO and you're on the road at the same time as SpaceX, no one is going to pay any attention to your deal."