Catenaa, Friday, May 22, 2026- Mega IPOs like those eyed by SpaceX and OpenAI threaten to push the weighting of tech in equity benchmarks beyond market-bubble levels of concentration, Bank of America said.
BofA Strategist Michael Hartnett said that Elon Musk’s SpaceX has outlined plans for the world’s largest initial public offering. At the same time, ChatGPT maker OpenAI aims to beat rival Anthropic to the market.
The gigantic share sales would feed into the optimism around tech and artificial intelligence that’s already powering one of the narrowest rallies in decades.
“Strong price action, retail mania, slumping vol … so bubbly,” Hartnett said in a note. “Add mega IPOs to AI big boys and market concentration easily surpasses (~48%) bubbles of roaring ‘20s, Nifty 50 ‘70s, Japan ‘80s, TMT ‘90s.”
Technology already accounts for over 44% of the S&P 500 Index. Further concentration potentially increases problems for asset allocators who are prevented by risk management constraints from fully tracking these weightings in their portfolios.
Stock indexes heavily slanted toward the surging tech sector also carry the risk of hiding weaknesses lurking beneath the surface in sectors more directly tied to the economy, like consumer and financial stocks.
Reviewing some past major IPOs, Hartnett said that debuts like Saudi Aramco and Meta Platforms, previously known as Facebook, had proved inconsequential for the broader stock market.
In some cases, markets were lower 9-12 months after “toppy” offerings like Visa Inc. and AIA Group.
A surge in bond yields is how booms and bubbles end, according to Hartnett, who correctly predicted the outperformance of international equities last year, and whose bullishness on commodities has paid off.
He identified a pair of State Street exchange-traded funds as twin indicators of how yields were influencing stocks.
A drop in the ETF of biotech names, usually viewed as speculative, to $120 would mean bond yields have continued soaring. If the ETF tracking retail stocks rises to $85, that would suggest the bond-related shock has been postponed, Hartnett said.
Bullishness has neared extreme levels, triggering a sell signal for stocks, Hartnett said.
BofA’s survey of fund managers published earlier this week showed investors increased their allocations to stocks by the most on record this month, prompting the strategist to reiterate a warning that equities look poised for a pullback.
“Consensus max bullish on Positioning & Profits, plus yields breaking up suggests some profit taking here,” he said in his latest note. “But no one cutting longs in stocks before historic IPOs and big top Policy tightening will come after CPI hits 4-5% in the coming months.”
