Today’s AI investor euphoria recalls the heady dot-com days of the 1990s, and it’s hard to tell how these bets will shake out. SpaceX, OpenAI and Anthropic are rushing to go public to take advantage of the favorable market conditions. But amid the elegies written about American capitalism, the latest mini-IPO boom is a welcome tribute to the dynamism of U.S. markets that no other country can match.
SpaceX fired the starting gun in the race on Wednesday when it filed paperwork with the Securities and Exchange Commission. The rocket company, founded in 2002, is a global leader in space exploration. It has also spread into broadband, mobile satellite service and data-center development.
Anthropic recently agreed to pay SpaceX $1.25 billion a month to use its data centers to train models. That shows how competitors can enjoy symbiotic relationships. SpaceX says the company as a whole reported a $4.9 billion net loss last year, some of which stemmed from its X.com social-media platform.
You have to respect Elon Musk’s ambition. SpaceX says in its filing that it foresees $28.5 trillion—yes, trillion—in market opportunities, including data centers in space. Mr. Musk in January was awarded one billion performance-based restricted shares that will vest if his company establishes a “permanent human colony on Mars with at least one million inhabitants.” Can the public nominate politicians to send to the colony?
Government pension funds kvetch that the IPO will preserve Mr. Musk’s control of the company by giving him more votes per share. But such dual-class structures are not uncommon (see Berkshire Hathaway or our owner, News Corp) and can encourage founders to take their companies public since they won’t lose control. If pension funds don’t like SpaceX’s structure, they don’t have to buy shares.
SpaceX could fetch a market valuation of upward of $1 trillion, a huge boon for its early private investors and employees with stock options. OpenAI and Anthropic have also heavily compensated their employees with stock options, partially as a way to preserve capital. Stock options allow employees to share in a company’s growth and success.
The shame is that retail investors have missed SpaceX’s early stratospheric gains. Companies are staying private longer because of the 2002 Sarbanes-Oxley Act’s burdensome regulations, shareholder litigation and abundant financing available in private markets. The number of public companies has shrunk by half in three decades.
This means ordinary Americans who invest in the stock market, either directly or through retirement accounts, are sharing less in America’s wealth creation. SpaceX will have been in business for 24 years before it takes the public-market plunge, compared to Amazon (three years), Apple (four), Google (six), Nvidia (six), Tesla (seven) and Facebook (eight).
OpenAI is 11 years old. Launched five years ago, Anthropic is a relative fledgling compared to other companies going public. But press reports last week said it plans to raise $30 billion from private investors at a $900 billion valuation ahead of an expected public offering. That’s $900 billion in gains that retail investors will have missed.
SEC Chair Paul Atkins wants to ease regulations on public companies and make it easier for retail investors to invest in private firms. That’s a better way to ensure Americans enjoy the gains from AI and growing markets than government redistribution. South Korea last week spooked markets by floating a “citizen dividend” from taxing AI profits.
Similar ideas are popping up in the U.S. on the left and right amid worries that workers will lose their jobs because of AI. A much bigger risk is that politicians reflexively respond to such fears with taxes and regulation that slow growth and make the economy less dynamic. That would make everyone worse off.
One reason the U.S. boasts the world’s most valuable companies and promising startups is because the government doesn’t seek to punish success—or handcuff entrepreneurs with regulation as the Europeans do. China boasts enormous human capital, but Beijing’s financial markets are stunted by the desire for political control. See Alibaba’s Jack Ma.
America also has the world’s deepest capital markets. U.S. public equity markets boast an aggregate market cap of some $70 trillion, more than twice as much as all of Europe’s stock markets. Who knows if Mr. Musk will every colonize Mars, but the surest bet is never to bet against American innovation.