The Year of the Humongous IPO

This is the year of the giga-IPO. Space X, Elon Musk’s aerospace and artificial-intelligence company, raised a record $75 billion in capital when it went public earlier this month, instantly becoming one of the 10 most valuable companies in the world. The AI giants Anthropic and Open AI, meanwhile, both recently filed to go public later this year, ensuring that in a matter of months, we will likely witness the three biggest IPOs in history.These massive IPOs are outliers in other ways too. The number of businesses going public has been shrinking dramatically, from more than 500 or so a year in the 1990s to about 120 a year over the past decade. Although the number of new businesses in the United States has surged in recent years, the number of public companies is down by almost 40 percent from its 1990s peak.So why are these buzzy companies in the hottest industry bucking this trend and going public? The answer is simple: because they need to raise staggering amounts of money to cover the enormous cost of competing in the AI race. This marks a fundamental change in the technology business.[James Surowiecki: SpaceX is basically a huge meme stock]Many tech giants of recent decades—think Facebook, Uber, and Airbnb—went public less to raise money than to give their early investors and employees a chance to cash out by selling stock. Although software and internet-based companies invested plenty in research and development, their capital expenditures were otherwise low. They built massive, and massively profitable, businesses without much in the way of up-front costs. (Even Amazon’s profits come mostly from its web-services business, not from retail.) At the same time, a boom in venture capital and private-investment funds allowed founders to raise money without subjecting themselves to the regulatory and reporting requirements of public companies.But developing AI is ludicrously expensive. SpaceX’s AI business, for instance, is burning through $1 billion every month. Open