Strykr Analysis
NeutralStrykr Pulse 55/100. The market is euphoric, but the math is getting weird and the risks are rising. Threat Level 3/5.
If you’re looking for a sign that the market’s risk appetite has hit escape velocity, look no further than the latest wave of AI IPOs. The spreadsheets are back, flashing green with the same manic energy that fueled the dot-com bubble, and traders are once again lining up to buy anything with a whiff of artificial intelligence. SpaceX’s S-1 filing is just the latest spark in a bonfire of capital. But beneath the surface, the numbers are starting to look hallucinatory, and the echoes of 1999 are getting harder to ignore.
The facts are simple. Over the past week, the IPO pipeline has been jammed with AI-adjacent companies, each promising to be the next Nvidia, each sporting revenue projections that seem to have been generated by a large language model after a few too many Red Bulls. According to the Wall Street Journal’s “Hallucinatory AI Math” op-ed, the spreadsheet jockeys are in full control, and the crowd is back to chasing green cells, not green shoots. The market’s collective memory of the dot-com crash appears to have been wiped clean, replaced by the conviction that this time, the tech is real and the TAM is infinite.
But let’s get specific. The XLK ETF, the bellwether for US tech, is holding flat at $191.01, refusing to budge despite the AI hype cycle hitting maximum overdrive. Chipmakers are still “the hottest stocks in the market,” as per YouTube’s latest market update, but the urgency in the debate over AI costs is starting to show up in the options market. Implied volatility is creeping higher, and the bid-ask spreads on some of the newly listed AI names are wide enough to drive a Tesla through. The IPO window is open, but the air is getting thin.
Market context is everything here. The last time we saw this level of exuberance was 2021, when SPACs were the vehicle of choice for speculative capital. Before that, it was crypto. Now, it’s AI. The difference this time is that the macro backdrop is less forgiving. The Fed is still in play, with a medium-impact Logan speech and the Beige Book on the docket for June 3. Inflation is sticky, and the bond market is quietly betting that AI will somehow solve the $36 trillion US debt problem, as GeekWire’s Etzioni points out. If that sounds delusional, it’s because it is.
The real story here is not that AI is a transformative technology. It’s that Wall Street has once again convinced itself that growth is limitless and risk is optional. The IPO mania is being fueled by cheap capital and a collective willingness to suspend disbelief. But the lessons of the dot-com bubble are clear: when the math stops working, the music stops playing. And right now, the math is starting to look very weird indeed.
Strykr Watch
Technically, XLK is stuck in a holding pattern at $191.01. The ETF has failed to break above its all-time high, and the RSI is hovering in neutral territory. The options market is flashing yellow, with implied volatility ticking up but not yet spiking. Watch the $190 level for support and $195 for resistance. If the IPO window slams shut, expect a swift move lower. If the hype continues, a breakout above $195 could trigger a fresh wave of FOMO buying.
The risks are obvious. If the Fed turns hawkish, the entire AI trade could unwind in a hurry. If one of the high-profile IPOs blows up (looking at you, SpaceX), sentiment could turn on a dime. And if the math behind these revenue projections is exposed as fantasy, the correction could be brutal. The bid-ask spreads are telling you that liquidity is not as deep as it looks.
Opportunities remain for the nimble. Fading the most egregious AI IPOs with put spreads is one way to play the skepticism. Alternatively, buying XLK on a dip to $188 with a tight stop at $185 offers a defined-risk way to participate if the mania continues. For the truly brave, shorting the weakest AI-adjacent names after their first earnings miss could be the trade of the summer.
Strykr Take
The spreadsheet euphoria is back, but the market’s collective amnesia is not a strategy. AI is real, but so is gravity. When the numbers stop adding up, the correction will be swift and merciless. For now, trade the hype, but keep one eye on the exit. Strykr Pulse 55/100. Threat Level 3/5.
Sources (5)
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