Listen to the audio version of this article (generated by AI).
I have said it before, and I will say it again: I do not buy IPOs (initial public offerings).
That is why I warned investors to stay away from the Space Exploration Technologies Corp. (SPCX) IPO.
A great company can still be a bad investment if you pay the wrong price. And the excitement surrounding a new stock can make that mistake especially easy to make.
In the case of SPCX, anyone who bought the stock when it went public on June 12 is now holding the stock for a loss.
Of course, this isn’t the first time an IPO has turned on investors. The same story played out over and over again during the dot-com bubble.
Back then, venture capitalists played an important role in funding young Internet companies and helping them mature. But as greed took over, that system broke down. Wall Street began pumping out one hot IPO after another, often at absurd valuations, because individual investors were willing to buy almost anything tied to the Internet.
In some cases, having no sales was treated as an advantage. Without revenue or earnings, there was nothing concrete investors could use to value the company. Promoters could simply tell a bigger story.
Then the bubble burst.
The NASDAQ plunged 77.9% from its March 2000 peak to its October 2002 low, and individual investors paid the steepest price.
See, an IPO may look like the starting line to the public. But for founders, early employees and venture investors, it can be the exit ramp after years of value creation.
But what about the wealth being created before a company ever reaches Wall Street?
In today’s ÃÛÌÒ´«Ã½ 360, I want to discuss the incredible shift we’ve seen in private-company valuations in recent years – and how the AI Revolution is accelerating this shift. I’ll also explain how this market has become too large for individual investors to ignore – and introduce you to the technology expert I trust to investigate these opportunities before Wall Street catches on.
The ÃÛÌÒ´«Ã½ Behind the ÃÛÌÒ´«Ã½
Before I go any further, I should add that the problem during the dot-com bubble was not venture capital itself.
Venture capital serves an important purpose. See, most startup companies are just too plain risky for traditional financing methods, like banks. Venture capital gives young companies the money and guidance they need to turn promising ideas into real businesses.
So, in many cases, that early support helps remove some of the risk before a company reaches the public market.
The trouble begins when the goal shifts from building a durable business to rushing an exciting story onto Wall Street just to make a quick buck.
That distinction matters today, because here’s the crazy part… The private-company market has grown far beyond anything we saw during the dot-com era.
Back in 2013, privately held companies worth at least $1 billion were so rare that venture capitalist Aileen Lee called them “unicorns.”
Today, according to Crunchbase, there are 1,821 unicorn companies around the world with a combined valuation of $8.8 trillion.
In other words, this is no longer some small corner of the financial world.
The term “unicorn” no longer really applies, if you think about it.
But it also means that private companies can now raise billions of dollars, hire thousands of employees, develop important technology and reach enormous valuations before ordinary investors ever see a ticker symbol.
You probably already know a few of the biggest names – but you may not know their staggering valuations:
| Company | What It’s Known For | Post-Money Valuation |
| Anthropic | AI company behind Claude | $965 billion |
| OpenAI | Maker of ChatGPT | $852 billion |
| ByteDance | Parent company of TikTok | $480 billion |
| Stripe | Payments platform | $159 billion |
| Waymo | Self-driving taxi technology | $126 billion |
Source: Crunchbase
Those are just a few of the big ones. But many more companies are working outside the spotlight. They are building specialized software, tools and technologies that could become critical to the next stage of the AI Revolution.
And some may never reach the stock market at all.
The Next Question Investors Should Ask
Tomorrow, you’ll hear from my InvestorPlace colleague Luke Lango about why the biggest technology companies increasingly buy innovation instead of building it themselves.
As Luke will explain, the AI race is moving so quickly that even giants like Alphabet Inc. (GOOG), Meta Platforms, Inc. (META) and Microsoft Corporation (MSFT) cannot develop every important capability in-house. When a smaller company has already solved a problem that could take years to crack, buying it may be faster and cheaper than starting from scratch.
That changes the question investors should be asking. Instead of only asking which large AI stock could be the next big winner, we should also ask which smaller company could become so important that one of those giants decides it has to own it.
We need to ask that question because, by the time a buyout is announced, much of the early value may already have been created.
The Technology Expert I Turn To
Now, my Stock Grader system evaluates publicly traded companies using hard data, including sales and earnings growth, analyst revisions and institutional buying pressure.
Private companies do not offer the same trail of public information.
So, when I want to understand a new technology before Wall Street has fully wrapped its arms around it, I turn to Luke.
Luke is a Caltech graduate, a former startup founder and one of the sharpest young technology analysts I know. He understands the technology, the founders and the Silicon Valley networks behind these companies.
More importantly, he has a knack for spotting important trends before they become obvious to Wall Street.
Right now, Luke believes many investors are watching the giant companies spending hundreds of billions of dollars on AI while overlooking the smaller businesses receiving that money, solving critical problems and positioning themselves as possible acquisition targets.
Of course, not every young AI company will succeed. The dot-com crash taught us what happens when investors stop asking hard questions and start buying stories.
That is why Luke studies the people running the company, the product they have built and whether the timing is right.
Your Ticket to a Different Side of the AI Boom
On Thursday, July 30, at 1 p.m. Eastern, Luke will explain this approach during a free online presentation called .
He will show you why he believes the AI investment cycle is entering a new phase, explain what makes a smaller company attractive to a technology giant and reveal one specific opportunity he believes illustrates the trend.
Sincerely,
Louis Navellier
Editor, ÃÛÌÒ´«Ã½ 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Alphabet Inc. (GOOG)
