Since 2025, the US IPO market has continued to heat up on the back of the AI narrative, with a wave of new listings emerging across computing infrastructure, AI chips, and application software. But for IPO investors, the real test often begins the moment a stock debuts: some AI IPOs surge on day one and become nearly impossible to get, while others fall below their offering price on the very first trading day. With the same AI halo, why do their fates diverge so dramatically? This article examines three dimensions—pricing mechanisms, gray market signals, and business models—to help beginners fully demystify IPO investing.
Sharp First-Day Divergence: AI IPOs Are Not Guaranteed Winners
Looking back at the 2025 US IPO market, the performance of AI newcomers can best be described as “fire and ice.” Take computing cloud provider CoreWeave: priced at $40, below its earlier marketing range, the stock briefly slipped below its offering price on debut day as the market questioned its lofty valuation and shrunken fundraising; yet over the following quarters, as AI computing orders kept materializing, the stock went on to double. In stark contrast, design software company Figma priced at $33, and its first-day opening price briefly topped $85—a gain of over 200%, making it one of the year's hottest debuts; once the frenzy faded, however, the stock also pulled back sharply.
Then there is stablecoin issuer Circle, priced at $31, which closed its first day up roughly 168%. All three companies carried a distinct “AI and new economy” halo, yet their outcomes were worlds apart. The pattern is actually clear: what determines first-day performance is not just theme hype, but the gap between the offering price and genuine market demand—the more conservatively priced the deal and the hotter the demand, the more stunning the first-day pop; conversely, when pricing approaches or exceeds what the market can bear, a below-offering debut is hardly surprising.
How Is the Offering Price Set? Understanding Bookbuilding Gets You Halfway There
Many beginners assume the offering price is set on a whim by the company, when in fact it emerges from a multi-round tug-of-war:
- Roadshow and price discovery: The company and its underwriters pitch to institutional investors, who respond with indicative prices and order volumes, forming the order book;
- Range adjustment: When subscriptions run hot, underwriters can raise the top of the price range; when demand is tepid, they may cut the price and shrink the deal size—CoreWeave was a classic case;
- Final pricing: The offering price is often set below what the secondary market would be willing to pay; this “discount” is the profit margin left for day-one buyers, and a customary practice by which underwriters protect their long-term reputation.
Once you grasp this, things become clear: a first-day surge does not mean the company is exceptional—it often just means the price was set cheap; a below-offering debut does not mean the company lacks prospects—the pricing may simply have been too aggressive. Returns from IPO investing are essentially returns from the “pricing game,” not a short-term cashing-in of the company's fundamentals.
How to Read the Gray Market? Three Signals Worth Watching Closely
The “gray market” for US stocks (pre-listing over-the-counter trading) has limited liquidity and its prices are for reference only, yet it still serves as a weathervane for IPO investors:
- Size of the premium: A gray market premium of 10% to 30% over the offering price reflects normal heat; above 50%, watch out for overheated sentiment—the risk of opening high and closing low on day one rises sharply;
- The trend in the hours before listing: If gray market prices keep sliding from their highs, institutions are showing a strong desire to cash out before the listing;
- Volume and spreads: When bid-ask spreads are wide and trading is thin, prices are badly distorted and of limited reference value.
A word of caution: the gray market is merely a sentiment thermometer and must never be treated as a certainty signal. History offers no shortage of cases where gray market prices soared, only for the stock to open high and fade on day one—chasing gray market quotes often means grabbing the last leg of the relay.
Three Types of AI IPOs, Three Completely Different Playbooks
Even within the AI theme, different business models call for completely different subscription strategies:
- Computing and infrastructure layer: Real revenue and visible orders, but massive capital expenditure and high leverage—focus on the scale of contracted liabilities and top-customer concentration; over-reliance on a handful of major clients is the biggest hidden risk;
- Chips and hardware layer: A beneficiary of the computing arms race, but with rapid technology cycles and volatile inventory swings—watch whether gross margins hold and whether advanced-node tape-outs and mass production stay on track; also benchmark valuation multiples against listed leaders like NVIDIA and AMD to avoid overpaying for the concept;
- AI application and software layer: Ample narrative room and high valuation elasticity, but commercial validation is often insufficient—focus on annual recurring revenue growth, net revenue retention, and customer acquisition costs, and don't let the word “AI” go to your head.
For everyday investors, a prudent process is: first read the risk factors and customer structure in the prospectus, then compare valuations against listed peers in the same space, and finally decide whether to participate, and with how small a position.
Four Pitfall Warnings for Beginners
- Don't anchor on the first-day open: Chasing in after a 50%-plus opening pop offers odds hardly better than winning an allocation; waiting for a pullback is often the calmer approach;
- Remember the 180-day lock-up: For most new listings, insiders can sell after 6 months, and the resulting supply surge often triggers a second bottom—plan your exit in advance once you've locked in gains;
- Control single-stock exposure: New listings are far more volatile than the broader market; keep any single position to no more than 5% to 10% of your total capital;
- Beware “fake AI” packaging: More and more companies with a dash of AI tell grand stories; the share of AI-direct revenue disclosed in the prospectus is the core test of true substance.
Conclusion: The Q4 Window Is Still Open—Rationality Matters More Than Speed
Historically, the fourth quarter has always been the traditional peak season for US IPOs. After more than two years of the AI theme playing out, market scrutiny of new listings has shifted from “theme first” to “earnings verification.” For IPO investors, this is actually good news: once sentiment recedes, pricing becomes more grounded, and companies with real revenue, real profits, and real moats are easier to spot. Rather than chasing every AI-branded newcomer, build your own watchlist and strike only when a company with reasonable pricing and a clear lane appears. At the end of the day, IPO investing pays for knowledge, not luck.
