Welcome back to Opening Bell Daily. The S&P 500 notched its 31st record close of the year on Tuesday, and the Dow and Nasdaq also marched higher.

In today’s edition, we’re covering AI hype in private markets, the IPO outlook for the rest of the year, Bank of America’s bullish fund managers, and more.

Today’s letter is brought to you by Rho

Building a business is hard. That’s why the Opening Bell Daily team loves using Rho, the award-winning banking platform that makes it easy for startups to manage their money.

Rho offers top-of-the-line customer service and a seamless platform for expense management, company credit cards, and high-yield savings. 

For a limited time, we’ve teamed up to offer qualifying Opening Bell Daily readers up to $1,500 in cash rewards for switching to Rho* — sign up today.

A stalled IPO outlook

The buzzy initial public offerings of Instacart and Arm last year drew plenty of attention, but they didn’t usher in the wave of IPOs many in the industry anticipated. 

At the same time, investors’ enthusiasm for artificial intelligence has also failed to catalyze a private-to-public boom.

While some of that hype has trickled down to early-stage companies, it hasn’t come close to reviving the IPO market at large, which has stalled since the pandemic. 

“People expected more IPOs this year, given the macro environment has checked a lot of boxes” said Brianne Lynch, the head of market insight at EquityZen, a platform that offers investors access to pre-IPO companies. 

Inflation has fallen from historic highs, stocks are making records, and volatility remains low.

But IPO activity has been lukewarm anyway. 

“The IPOs we have seen this year have a strong first day, but a mixed longer-term performance,” Lynch told me. 

Medical data company Tempus AI, for one, debuted Tuesday with an 18% rally.

It’s since fallen 24% below its IPO price, which points to both the softer appetite for new trading as well greater discretion for AI bets. 

Reddit, meanwhile, hit public markets in March. It currently changes hands about 23% higher than its IPO price.

Like Arm and Instacart however, much of that strength can be explained by brand recognition among retail traders and consumers. 

Lesser-known companies looking to capitalize solely on the AI wave face a steeper path to a successful IPO.

“Any company that is going public now is going to try to weave AI into the narrative because there’s so much demand for it,” Lynch said.

“Tempus is a company that’s not yet profitable, but it has that AI component, so it checks a box for some investors.”

High interest rates have raised the bar for anyone who thought they could IPO just by tacking “AI” onto their website.

Private companies today have to show much stronger balance sheets than a few years ago, especially ones pushing nascent technology. 

To be sure, over the last several quarters, EquityZen’s most in-demand industries among investors have been AI and machine learning. 

Still, Lynch said most AI names are too young or too unprofitable to go public at this point — which suggests the AI theme alone isn’t enough to shake the market from its hangover. 

“Given how quiet the IPO market has been the past few years, it will likely take these household names to get things going again,” she said, nodding to StubHub’s rumored IPO later this year.

“But I don’t think we’ll see a flood of activity. Most people have accepted that we’re looking at 2025 for that to be the case.”

How confident would you be buying into a lesser-know IPO in the current market? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

Elsewhere:

💰️Investors around the world are ultra bullish. Bank of America’s latest global fund manager survey showed cash allocations remain low. More money is flowing into equities as sentiment looks the most bullish since November 2021. More than half of respondents now believe there will be no recession in the next 18 months. (Yahoo Finance)

🚀Nvidia is up 591,000% since its IPO in 1999. After debuting, it took less than 3 years for the company to secure a spot in the S&P 500 — and it replaced the disgraced energy giant Enron. Fast forward to this week, and it’s leap-frogged Microsoft as the world’s most valuable company. (Bloomberg)

🤖AI enthusiasm is getting more selective. Dozens of AI names that benefitted from early momentum have seen recent declines. More than half of the stocks across BlackRock, Invesco, and First Trust and Nasdaq’s AI-themed ETFs have declined this year. (FT)

Rapid-fire:

Last thing:

Interested in advertising in Opening Bell Daily? Email phil@openingbellmedia.com