The Weekend Edition is pulled from the daily Stansberry Digest.
"The Internet just changed hands"...
As our colleague Josh Baylin pointed out in his new issue of Mosaic Trader on Tuesday, the Internet has reached a major "tipping point." As Josh wrote...
[Last Thursday,] Cloudflare (NET) CEO Matthew Prince opened social media platform X and told the world that, for the first time in the history of the Internet, automated bots drive more web traffic than human beings...
The Cloudflare Radar showed that, of all requests to websites Cloudflare hosts, 57.4% are now automated. Only 42.6% come from humans.
In other words, AI agents run the Internet now.
This shift shows why the approach Josh takes in Mosaic Trader (which he launched earlier this year) is so valuable. He researches the tools that let AI agents perform tasks without direct human prompting and highlights when they're gaining momentum ‒ weeks or months before those tools start making headlines.
However, while AI tools or other emerging technologies have their uses, they won't replace the value of original, independent thought.
And in a world where bots regurgitate mainstream narratives, independent thinking – and the freedom to produce and access it – might be more important than ever.
The OpenAI IPO Is Next
The mega-cap IPO train is now running fast...
On Monday, OpenAI announced that it filed paperwork for an initial public offering ("IPO") with the Securities and Exchange Commission.
In a brief statement, the AI company said that it has not decided on the IPO's timing and added that "it may be a while because there are things we want to do that are likely easier as a private company. But it's a complicated set of tradeoffs and this gives us the option to go public sooner if that ends up being best."
OpenAI's announcement means we'll have three mega-cap IPOs this year. SpaceX began trading on Friday, and OpenAI's rival Anthropic confidentially filed for an IPO on June 1.
These huge IPOs have been getting a lot of attention. All three sport expected valuations of at least $800 billion, and potentially much more – enough to make each of these companies one of the 15 largest in the U.S.
The buzz is loud, but the risks will be significant. SpaceX doesn't make money. OpenAI has said it might not be profitable for years. Anthropic is on track to have a profitable quarter, according to reports, but it will be the company's first.
As our colleague Whitney Tilson recently shared in DailyWealth, SpaceX and OpenAI are two of the "most overhyped, overvalued large-cap [stocks] of all time." He dove into SpaceX's balance sheet to explain why.
These companies are cashing in on the public's money during the AI boom. And as many have noted, a run of IPOs like this could signal the top of a mania.
But it's hard to know for sure. Bubbles often get crazier – and go on longer – than you expect. For instance, during the dot-com era, markets continued running much higher even after several big-name IPOs.
It's a scenario worth considering...
Back in 1995, web-browser company Netscape kicked off the dot-com bubble with its IPO. And several other high-profile IPOs followed... like Yahoo, Amazon (AMZN), and eBay (EBAY).
As Eliant Capital noted in a post on X on Monday, none of those IPOs marked the top in stocks...
(Click the image to expand.)
So the SpaceX, OpenAI, and Anthropic IPOs might not indicate that we're nearing the end of the AI boom. Instead, these IPOs could kick off the next wave of euphoric sentiment for AI-related stocks.
What the Job Market Tells Us About AI
AI's increasingly real impact...
While the AI boom has an outsized effect on investors, the trend is starting to produce a "real" economic impact.
As our colleague Mike Barrett has explained to his Select Value Opportunities subscribers, spending linked to data-center development has overtaken consumer spending as the biggest driver of U.S. economic growth, according to GDP numbers.
In a June 1 report, the U.S. Census Bureau revealed that monthly data-center construction spending eclipsed $50 billion in April for the first time ever.
That outpaced all public spending on transportation-related infrastructure, like airports, marine terminals, and mass transit – also for the first time. And now the trend is showing up in jobs reports, too... like the recent "nonfarm payrolls" report for May.
It showed an increase of 172,000 jobs last month, blowing economists' consensus expectations of 80,000 out of the water. As Mike explained on Wednesday...
Nonresidential construction employment increased for the seventh consecutive month, due to the data-center spending spree we noted earlier. The manufacturing sector also added jobs for the same reason. But, again, jobs growth was broad... We saw rising payrolls across sectors – from leisure and hospitality to healthcare.
It's not all sparkling news on the AI front, though. For one thing, a strong jobs market also raises fears of interest-rate hikes from the Federal Reserve, to cool off inflation and the economy...
Not only that, but executives are now citing AI as the top reason for laying off workers. The tech firms closest to the technology seem to be the most likely to let people go...
Last month, technology firms announced 38,242 job cuts, the most of any sector. But they also announced more hires (11,250) than any other sector in May.
The key point here is that AI's economic effects are starting to move out of the shadows and into the light. As Mike wrote...
High inflation and rising interest rates are hampering profitability and stunting economic growth. And AI-related layoffs are also on the rise. Despite those factors, the overall U.S. employment picture keeps getting better, not worse.
This is exactly what University of Chicago economist Alex Imas suspected would happen. Imas posited that AI would increase the value of jobs where the human touch is the whole point, even as the automated economy continues to expand.
The bottom line is, the veil of invisibility is finally coming off... AI's true impact is showing up in the official government statistics that investors have long relied on.
The potential of the AI boom seems to be materializing...
That doesn't mean you should rush out and buy the major AI IPOs as soon as they begin trading.
Sure, they may soar in their early days... as retail investors gripped by hype snap up any shares they can get their hands on.
But as my colleague Whitney Tilson has discussed, the underlying businesses don't justify the astronomical valuations these companies are receiving. And early investors will sell shares over time. Again, the risk in these trades will be substantial.
Instead, long-term investors should go beyond the big names... and look for fairly valued companies in the same sectors.
All the best,
Corey McLaughlin
Editor's note: On Tuesday, June 16, at 1 p.m., Whitney is going online with Market Maven editor Gabe Marshank to discuss how new "fast entry" rules will impact these huge AI IPOs ‒ and the market as a whole. They believe these rules could change where trillions of investment dollars go... with far-reaching consequences for millions of investors. Be sure to reserve your spot ahead of time.
