👀 What to know about Friday's AI IPO

What’s going on here?

Individual investors have piled into US stocks this year – even as the pros took their cue to file out.

What does this mean?

Institutional investors have been backing out of US stocks at a record pace. They seem turned off by the risk of a global trade war, mounting skepticism around “American exceptionalism”, and possible stagflation – the dreaded combination of rampant inflation and sluggish economic growth. So you’d think retail traders would be taking their chips off the table, too. Nope: they’ve poured $67 billion more into US stocks and ETFs than they’ve taken out this year, according to VandaTrack.

Why should I care?

For markets: This year may not be like the last.

You can’t blame retail investors for continuing to jump on the bandwagon: the “buy the dip” strategy has paid off handsomely over the last few years. But it might play out differently now. A JPMorgan model tracking retail investors’ money flows shows that they’ve lost 7% of their capital this year – more than triple the drop in the S&P 500. If buying the dip keeps disappointing, those investors might cut their losses en masse – and that could spell more trouble for the market.

The bigger picture: It could pay to be picky.

Finimize readers are proving that they’re not your average investors, building up cash reserves while targeting specific sectors and exploring opportunities outside of America. Over half of the respondents to the latest Modern Investor Pulse survey are planning to up their exposure to non-US stocks – and you can see why. European markets have outperformed America’s recently, with investors enticed by Germany’s commitment to spend hundreds of billions of euros on defense and infrastructure. It helps, of course, that European stocks are still much cheaper than their stateside counterparts.

What’s going on here?

Cloud computing company CoreWeave flexed its plans to list on the Nasdaq, which would aim to raise $3 billion at a hefty $27 billion valuation, but would-be investors should probably do some heavy lifting on the numbers first.

What does this mean?

CoreWeave sells cloud infrastructure to companies that need serious computing power – AI ones, usually. And its offerings are pretty high-end: CoreWeave’s partnership with Nvidia – cemented by the chip designer’s 6% stake in the startup – has secured it ongoing access to top-of-the-line chips. With much of the world cozying up to robots, business has been booming. Last year, CoreWeave’s revenue was eight times higher than the one before – that came at a cost, though. After burning through nearly $6 billion last year, the startup is now $8 billion in debt. So, ready to take advantage of the AI fervor and pay down those IOUs, CoreWeave is expected to go public this Friday.

Why should I care?

The bigger picture: Beware the impulse purchase.

It’s natural to be tempted by a tech firm’s debut. You could, after all, be buying the next Google. Just bear in mind that CoreWeave’s $27 billion valuation would only be justified by the company consistently increasing its revenue by 30% for nearly a decade, according to Forbes. That’d be a seriously mean feat – even without accounting for fierce competition and the unclear future of AI. And don’t forget, public listings generally disappoint: they often underperform the broader market over the long term. In many cases, you’d have been better off simply buying the S&P 500.

Zooming out: Up, up, and… back down again.

The number of AI data centers in the works is picking up faster than demand for the actual services they power. That could lead to a market bubble – or, at least, Alibaba’s chairman thinks so. Potential CoreWeave investors, take note: if interest in AI wanes, it’ll be a lot harder for the company to pay back its multi-billion-dollar debt.