The Biggest IPOs in History Are Headed for Your Retirement Account

Whether you like them or hate them, you’ll likely become an investor without having any say in the matter.

SpaceX just went public and raised $75 billion through its IPO. OpenAI and Anthropic are next in line. Together, these three companies could represent nearly $4 trillion in market value, making this the largest wave of IPOs we’ve ever seen.

The headlines are focused on valuations, growth projections, and whether these companies will ever live up to the enormous expectations investors are placing on them. That’s understandable. When trillion-dollar companies come to market, everyone wants to know whether they’re worth the price.

Millions of people probably think they’re sitting on the sidelines watching SpaceX, OpenAI, and Anthropic go public. But whether you like them or hate them, you’ll likely become an investor without having any say in the matter.

That’s right.

Because who will ultimately be buying all of these shares? The answer, at least in part, is most Americans who are saving for retirement through their index funds.

If you contribute to a 401(k), own an IRA, or invest through broad market index funds, there’s a good chance you’ll soon own pieces of these companies whether you make a conscious decision to buy them or not. That’s because the vast majority of retirement assets today are invested through index funds, target-date funds, and ETFs that automatically adjust their holdings as indexes change.

@wealthrampEveryone's asking "where should I put my money?" with trillion-dollar IPOs like SpaceX and OpenAI on the horizon — but that's the wrong question. The right question is: what job does this investment need to do? Stocks for growth, bonds for income and stability, cash for liquidity, international and private investments for diversification. Every dollar in your portfolio should have a purpose — if you can't explain its job, it might be time to fire it. #personalfinance #investingtips #portfoliostrategy #wealthbuilding #financialplanning

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Nasdaq recently revised its methodology to allow certain mega-cap IPOs to qualify for inclusion in the Nasdaq-100 after just 15 trading days. That means SpaceX could become eligible for inclusion as early as July. Once a company gets added to a major index, funds that track that index must buy shares in order to mirror its holdings.

This is one of the reasons indexing has been such a powerful investment strategy. Index funds don’t try to predict winning horses in the race – they simply invest all the horses in the race. And the approach has helped millions of investors build wealth through low costs, broad diversification, and disciplined investing.

But what so many people don’t realize is that indexing doesn’t ‘buy and hold.’ Your index fund does not stand still. The indexes themselves are constantly changing. New companies get let in. Others leave. In other words, your funds are buying and selling so as markets evolve, your retirement portfolio evolves in lockstep with them. And these are changes you might not know to pay attention to.

The next IPO wave is a perfect example.

When companies as large as SpaceX, OpenAI, and Anthropic are admitted into public indexes, retirement dollars become part of the buying force. Stock analysts estimate that SpaceX alone could attract billions of dollars in automated buys from index-tracking funds once it becomes eligible for inclusion.

None of this should be interpreted as a warning against innovation. Some of the greatest investments in history started out as exciting young companies with no profits but massive ambitions. Innovation drives economic growth, and long-term investors should benefit from that growth.

But investors should also remember what an IPO represents. Here’s what I keep thinking about.

For the venture capital firms, hedge funds, founders, insiders, and early employees, an IPO is the payoff. They’ve been waiting and holding shares for years while the company was still private. They’ve watched the valuation climb from millions to billions and, in these cases, from billions to trillions.

The challenge for you as someone saving for retirement in your index funds is that by the time a company reaches a trillion-dollar valuation and becomes large enough for index inclusion, many of those early-to-the-party investors have already enjoyed an extraordinary run up. But will the future returns justify the price that new investors, and your retirement account, are paying?

This is the conversation worth having with your advisor. Not whether SpaceX, OpenAI, or Anthropic are incredibly impressive companies. They clearly are.

That’s the trillion dollar question I suggest you consider right now.

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