A Catalyst for the AI Bubble Break

The AI bubble is more likely to break when a surge in equity supply overwhelms constrained buyers than when disappointing AI economics become obvious.

• GMO identifies the final release of roughly $2 trillion of SpaceX shares on June 12, 2027 as a potential catalyst, alongside likely Anthropic and OpenAI IPOs and secondary issuance driven by hyperscalers.
• Former SpaceX shareholders may sell to fund taxes, debt repayment, liquidity needs or new investments rather than recycle all proceeds into equities, creating net additional public-equity supply.
• Historical data show that, after controlling for valuations, a 1% increase in IPO market share was followed by an approximate 4% decline in prices over the next year.
• Markets have become more sensitive to supply because investment mandates segment investors: a U.S. equity manager may be unable to buy foreign assets, reduce overall equity exposure or deviate materially from a benchmark.
• More than 50% of equity assets were in passive vehicles in 2025, versus less than 10% in 1980; the share of U.S. active-fund dollars invested off benchmark fell from about 80% in the 1980s to 60% in 2025, leaving only about 30 cents of each equity-market dollar available for opportunistic trading.

Takeaway: Investors should watch forthcoming equity issuance and the market’s limited absorption capacity as an earlier warning signal for an AI-led equity reversal, even before AI revenues visibly fall short of expectations.