IPO Fever
With several high-profile private companies moving toward public markets in 2026, clients are asking whether the next wave of IPOs could be worth watching. Names like SpaceX, Anthropic, OpenAI, and other likely “hot” stocks generate a lot of excitement, and the headlines can make it feel like there may be a narrow window to act. But whenever the stock market’s hype machine starts building momentum around a new gold rush, we think it is worth pausing and putting that excitement in context.
Decades ago, most promising companies went public earlier in their growth cycle, giving public-market investors more opportunities to participate in their long run of growth. Today, with private equity and venture funding available, many companies stay private much longer, which means a larger share of those early gains often accrue to a smaller group of private investors before the public gets access. If SpaceX were included in the S&P 500 Index today it would already be the 7th largest company.
Dimensional’s illustration below shows the perils of “chasing” the biggest stocks. Historical data gives us a useful reminder. From 1927 through 2025, companies that eventually became one of the 10 largest stocks in the U.S. tended to post strong returns BEFORE reaching that point. The more important takeaway, though, is what happened AFTER these companies became market darlings. Once they joined the Top 10, their future returns were far less impressive.
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FOR RESEARCH AND EDUCATIONAL PURPOSES ONLY.
Past performance is no guarantee of future results. This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security. Named securities may be held in accounts managed by Dimensional. In USD. Source: Dimensional, using data from CRSP. Includes all US common stocks excluding REITs. Largest stocks identified at the end of each calendar year by sorting eligible US stocks on market capitalization. Excess return for each stock is the difference in annualized compound returns between the stock and the S&P 500 Index, computed from the first month following initial classification in the top 10. Annualized returns are computed for companies with return data available for the entire period. NYSE American and NASDAQ common stocks included in CRSP starting in 1962 and 1972, respectively. The number of firms included in measuring excess returns prior (subsequent) to becoming a Top 10 stock consists of 44 (58) for the three-year period, 43 (56) for the five-year period, and 34 (50) for the 10-year period. CRSP data provided by the Center for Research in Security Prices, University of Chicago. S&P data © 2026, S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value Dimensional Fund Advisors does not have any bank affiliates
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That does not mean today’s exciting companies are bad businesses or that they cannot continue to grow. It simply means that by the time a company is widely recognized as a market leader, a lot of good news may already be reflected in the stock price. Positive surprises can still push prices higher, but those surprises are difficult to predict. For clients, the better approach is usually not to chase the hottest story, but to stay broadly diversified and let the market’s collective pricing process work over time.
As 2026 IPO headlines continue to build, our message is not to ignore innovation or avoid great companies altogether. It is to separate excitement from investment discipline. Hot IPOs can be tempting, but durable wealth is usually built by owning a thoughtful mix of investments, managing risk, and resisting the urge to let the latest market story drive the plan. We will continue to evaluate new opportunities carefully, but always through the lens of each client’s broader goals, time horizon, and portfolio strategy.