For the first time in weeks, investors got nervous. About the war in the Middle East. About the runaway chip rally. About high interest rates. Then came SpaceX’s IPO.
The space-exploration company’s market debut went off without a hitch on Friday, instantly making Elon Musk’s rocket company one of the most valuable companies in the US with a market capitalization of $2.1 trillion. A key component to the stock’s double-digit price rise proved to be a huge wave of do-it-yourself traders, who bought nearly $18 million of SpaceX stock in the first 20 minutes of trading, according to Wanda Research.
By the end of the day, net retail buying totaled about $118 million – the largest IPO for individual investors in recent history, Wanda analysts said.
“This appears to be the ultimate FOMO IPO,” said Zaid Admani, a 34-year-old investor and podcast host, referring to the acronym for “fear of missing out.” Admani spent the day glued to his ultrawide monitor, looking at SpaceX stock. “Everybody wants a piece of this thing.”
The widespread enthusiasm was a welcome end to one of the most volatile weeks in markets this year. And it wasn’t just SpaceX that benefited from this. Almost everything rose on Friday: banks and financial companies, semiconductor stocks, even shares of smaller companies – gains boosted by the latest signs of an end to fighting in the Middle East.
Analysts said SpaceX’s reception was a good omen for two major artificial-intelligence IPOs expected later this year. It was also an encouraging sign that investors have not fully relented on risky tech bets, which have been hit in recent days by the artificial-intelligence rally, higher rates and concerns about war.
For several weeks, U.S. stocks had rocketed higher, driven largely by a surge in shares of semiconductor companies that were profiting big from the AI boom. The share prices of some chip companies have doubled or tripled. Mom and pop investors piled in as indexes posted back-to-back records: Total volume for both retail stock and options trades hit new records in May, according to Citadel Securities.
But things became unstable in the first few days of June. A better-than-expected jobs report on June 5 raised fears that the Federal Reserve might have to raise borrowing costs. The Nasdaq fell 4.2%. President Trump threatens to resume US attacks on Iran; Oil prices increased. And traders were once again nervous that the staggering pace of the AI investment boom might not be sustained.
As volatility increased, individual investors took a step back. Last Friday’s decline was the biggest day for retail sales in more than a year, according to JPMorgan analysts. Some people began to worry that market conditions ahead of the upcoming mega IPO might scare away investors.
Enter SpaceX, whose debut helped quell any suspicions that traders were losing their appetite for more speculative play. For some, including Alan Tran, founder of investment community HaiKhuu Trading, volatility was the issue.
Tran bought and sold SpaceX for a 10% return in a matter of minutes, and Tesla shares jumped when he saw that the stock had fallen after SpaceX’s debut. Overall, they achieved a good return of five points at home.
“I’m probably going to get some steak this weekend,” he said. “Thanks Elon.”
The Wall Street Journal reported Friday that individual investors alone requested nearly $100 billion worth of shares in the SpaceX IPO.
Now the coming days are in front of new tests. The parabolic rise in chip stocks still reminds many of the boom and eventual end of the dot-com boom. The latest reports of a near peace deal have sent oil prices lower, easing some concerns about inflation and relieving some pressure on the bond market. But the renewed fighting can turn so quickly.
Michael Rosen, chief investment officer at Angels Investments, said Friday’s rally may prove more a measure of Musk’s cult status than an overall read on the market’s appetite for risk.
“Strong performance is indicative of a more risk-taking mode,” Rosen said. Still, he added, “I think there’s an aura around Elon that makes it special.”
A key question is whether the euphoric gains seen in a relatively small group of crowded bets can spread to the rest of the market. Some investors expressed concern that the recent rally looks narrow, leaving the index more vulnerable to downside.
Despite those concerns, real estate, consumer staples and healthcare stocks all finished the week higher, picked up by investors looking for exposure to chip-stock turmoil. And the equal-weighted S&P 500 index — which weights member companies equally, not by market cap — is still hovering near a record, a sign that investors are buying more from tech, Strategus chief market strategist Chris Verone wrote in an afternoon note.
“There may be a time when we need to be more concerned about breadth, but with the equally weighted S&P 500 at all-time highs, that probably won’t be the case,” he wrote.
Write to Hannah Erin Lang at hannaherin.lang@wsj.com