Anthropic, OpenAI IPOs May Spur Early Tax-Loss Selling, Evercore ISI Says

The prospect of blockbuster initial public offerings from artificial intelligence leaders Anthropic and OpenAI could prompt an early wave of tax-loss selling in underperforming large-cap stocks, according to a Sunday report from investment bank Evercore ISI. Institutional investors are reportedly looking to raise liquidity to participate in the upcoming listings, which could reshape equity portfolios.

Making Room for Mega-IPOs

With Anthropic and OpenAI reportedly considering public listings, fund managers may need to sell existing holdings to finance new investments without increasing leverage. This dynamic could lead them to engage in tax-loss harvesting earlier than the traditional October timeframe, potentially starting after the Labor Day holiday.

Evercore ISI estimates the prospective IPOs could be substantial, with potential valuations of $100 billion for Anthropic and $60 billion for OpenAI. The analysts view these offerings not as a sign of a market peak, but as the start of a new, long-term productivity cycle driven by AI, drawing parallels to Netscape's transformative 1995 IPO rather than the dot-com bust.

Potential Liquidation Targets

To identify stocks most vulnerable to this pre-IPO selling pressure, Evercore screened the Russell 3000 for companies with market capitalizations over $5 billion that are down more than 10% year-to-date, trading near their annual lows, and facing negative earnings revisions.

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Key companies that fit the criteria include:

• The Trade Desk Inc (TTD): Down 62.0% year-to-date, with three-month earnings per share (EPS) revisions down 59.7%.
• Lululemon Athletica Inc (LULU): Down 51.6% year-to-date, with EPS revisions down 10.7%.
• Tesla Inc (TSLA): Down 21.3% year-to-date, with EPS revisions down 10.3%.
• International Business Machines Corp (IBM): Down 20.7% year-to-date, with EPS revisions down 1.0%.

Bull Market Fundamentals Intact

Despite the potential for isolated selling pressure, Evercore ISI maintains a constructive outlook on the broader equity market. The firm noted that classic indicators of a structural bull market top—such as an aggressive Federal Reserve hiking cycle, 10-year Treasury yields above 5%, or an impending recession—are not currently present.

Furthermore, the report highlighted that S&P 500 earnings surprises remain strong at approximately 23%, suggesting underlying corporate health. This indicates that while some stocks may face headwinds from portfolio rebalancing, the fundamental support for the broader market remains solid.