Recap: Will 2025 Be the Year of IPOs for AI?

To call the last two years “tepid” for tech initial public offerings would be an understatement. In the wake of a record-smashing high in 2021, IPO deal proceeds plummeted 94% in 2022 and have been slow to recover. But 2025 could be looking up, with some big names likely to hit exchanges.

At a recent event about artificial intelligence’s impact on the IPO market, Anita Ramaswamy, The Information’s financial analysis columnist, sat down with three investment experts to discuss what to expect in the IPO market in 2025:

• Erik Peña, head of market development, New York Stock Exchange
• Sirisha Kadamalakalva, managing director, software investment banking, global head of AI/ML, Citi
• Kristina Nilsson, managing director, technology investment banking, head of applied technology and AI, J.P. Morgan

The Year Ahead for IPOs

The panel agreed that while IPOs are unlikely to match the frenzy of 2021, 2025 could be a good year for exits.

“I think the sentiment for going public is more positive, opportunistic and optimistic,” said Kristina Nilsson, pointing to 2023’s and 2024’s strong tech earnings.

Erik Peña agreed, noting the changed macro environment—from lowered interest rates to reduced inflation—that he sees bolstering investor sentiment.

“There’s more momentum and excitement than there’s been in years,” he said. “We’re very hopeful of the prospect of turning a corner in 2025.”

A Dot-AI Bubble?

In the wake of two years of nonstop AI hype, investors have become savvier about looking behind the curtain of companies that claim the AI mantle before investing, the panel agreed.

“Adding dot-ai is not going to make you an AI company. Investors are sophisticated and see right through that,” said Peña.

On the financial side, he said that he believes a company needs to demonstrate its monetization potential and have a real technology, not just the promise of one. In his view, investors are prioritizing larger companies that have earmarked large sums—think $300 billion—to AI. Peña said that he thinks strong board governance is also essential for AI companies going public, as is a strong story about what makes them stand out as an AI company.

“Every company wants to be an AI company now, for the marketing and the multiple bump,” said Sirisha Kadamalakalva. “But to get that bump, you need to prove you’re doing something to drive your top line higher or your cost basis lower with AI in a big way.”

The AI Investing Pyramid

With the billions investors are pouring into AI, many of them are wondering what part of the AI tech stack is likely to drive investment. Kadamalakalva said with demand soaring, the opportunity lies in building the foundations.

“I think of it as a pyramid, where the highest-multiple bumps come from the bottom layer of the tech stack—chips, cloud, models,” she said, pointing to the revenue growth of companies like Nvidia and Dell. “At the top of the pyramid are apps, where the AI multiple bumps are the lowest.” Once the infrastructure gets built out more, she believes apps will be in a better position to earn revenue.

Nilsson agreed, adding that right now, “we’re very much in the picks and shovels stage of AI, and we need to think about building data centers, chips and the energy complex first.”

The Election and Beyond

The elephant in the room is how a Donald Trump presidency might impact the AI industry in the foreseeable future. On that front, many on the panel were bullish, in part because Trump signals he’s likely to lift Biden-era restrictions.

“We’re expecting a sort of AI deregulation from the new administration, as well as a loosening of environmental regulations around the construction of data centers,” said Peña. Both moves, coupled with Trump likely rescinding a Biden executive order that added guardrails around AI’s use, could have a “pretty meaningful impact,” on the industry, he said.

Kadamalakalva agreed that we’re likely to enter an era of deregulation. She said that could also bolster mergers and acquisitions, which a lengthy regulatory process, has been slowing down.

“Large companies will start coming to the M&A market to enhance their valuations. And that’s going to also enhance the attractiveness of smaller companies,” she said, noting that the mood among industry professionals has been buoyant: “It certainly feels like the floodgates have opened.”