SpaceX’s initial public offering on Friday drew retail investors in droves, and analysts are using its huge success to rebrand the entire tech sector. Net retail purchases of SpaceX shares on the first day of trading amounted to $117 million, representing 56% of total retail purchases on the stock market, according to a Sunday analysis by Vanda Research. Retail investors ended up taking an above-average 20% of the $75 billion IPO, while hedge funds accounted for 10% and institutional investors with buy-and-hold strategies accounted for 70%, Reuters reported on Monday, citing people involved in the deal. Friday’s $117 million in individual stock retail purchases tracked by Vanda are separate from overall retail allocations, many of which are made through brokerage firms. This retail frenzy was specific to SpaceX and did not reflect a large overall surge in individual stock trading among these mom-and-baby investors. In fact, last week’s trading volume was just $209.3 million, the lowest net retail purchase of individual stocks since March 2020, according to Vanda analysts. A new cluster of elite companies The targeted enthusiasm for SpaceX is another sign of the concentration of interest in elite supercap companies that have been driving stock market performance and investments across the economy. SpaceX’s entry into the club and the upcoming debuts of frontier software makers OpenAI and Anthropic are forcing a rebranding of the club itself. The “Magnificent Seven” technology names (Apple, Alphabet, Microsoft, Amazon, Nvidia, Meta, Tesla) are no longer seven. “If the past few years have been dominated by the ‘Magnificent 7,’ Friday was perhaps the clearest sign that investors are starting to focus on the so-called ‘FAB 10’ (Frontier AI & Big Tech 10),” Banda said. FAB 10 consists of the Magnificent Seven, SpaceX, OpenAI, and Anthropic. The last two companies are not yet publicly traded companies, but both are expected to debut later this year at valuations in the low hundreds of billions of dollars. “Together, these companies represent the future of AI and technology that will define the next decade,” Vanda said. On Friday, fintech companies became one of the most vocal about this emerging hierarchy among top technology companies. “(SpaceX) outperformed the second most traded stock of the day, which was NVIDIA on our app, by 533%,” Leif Abraham, co-CEO of financial platform Public, told CNBC on Monday. “NVIDIA, Apple, Microsoft, Tesla, Meta, and Google combined still trade more than that.” Chip SpaceX’s popularity as a source of capital drew money away from other segments of the market popular with retail investors, who may also have been sitting on dry powder. Vanda researchers said on Sunday that semiconductor stocks, which rose sharply during April and part of May, “are no longer the best friend of retail investors.” “Quasi-semiconductor stocks, which once dominated retail buying, are becoming a source of funding for new opportunities,” they said. Despite an above-average retail allocation and massive hype, SpaceX trading on Friday wasn’t particularly volatile, with the stock rising in after-hours trading. The momentum continued into Monday trading, with the stock up 11% to over $179 per share in midday trading. Many on Wall Street see the technology sector’s current valuations as a sign of a bubble after huge capital expenditures and large investments with no proven returns yet. That means there’s pressure on the newest members of the Magnificent Seven to live up to the hype. Failure to do so could mean a complete reassessment of the sector. Dan Alpert, founding managing partner at Westwood Capital, told CNBC on Friday: “There is a fundamental lack of effective capital utilization.” “If this highly hyped series of IPOs does not pan out, it will likely lead to a reassessment of the value that has been ascribed to the technology sector.”Despite the significant interest in SpaceX from retail investors, the group’s purchases represent only a fraction of its total sales, with the majority going to institutional investors. SpaceX has lowered its allocation to retail investors to about 20% from 30% before its IPO, suggesting strong demand from hedge funds, asset managers, venture capitalists and big-money investors. Ron Baron, CEO of asset management firm Baron Capital, on Friday increased his holdings in SpaceX from $24 billion to $25 billion. “We bought another $1 billion on Friday,” he told CNBC. “I didn’t want to dilute it. I wanted $1 billion to maintain the percentage.”
