Private tech valuations in the spotlight after public market correction
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Illustration: Sarah Grillo/Axios
Private markets have a history of following public markets, with a lag.
- We might be in the midst of that lag.
Driving the news: U.S. tech stocks lost trillions of dollars on Thursday, with the Nasdaq Composite suffering its worst percentage decline since President Trump unveiled his "Liberation Day" tariffs.
- A lot of fingers were understandably pointed at the midterm results, given how many Democrats want to slow data center construction and take other measures that could curb AI growth.
- But, to be honest, no one really knows what happened yesterday. Stocks rallied on Wednesday — when the blue tsunami was known — and the Nasdaq is rebounding on Friday.
The big picture: What's more important than this week is this year.
- The Nasdaq is up around 6% year-to-date and down more than 4% over the past six months.
- Does that even sort of track what you're seeing in skyrocketing private tech company valuations? Obviously it's not apples-to-apples — particularly when looking at high-growth startups — but the directions should track. At least eventually (i.e., the lag).
Zoom in: An irony is that many Americans just voted against AI acceleration at a time when their financial exposure is about to increase.
- Alternative investments like private equity and private credit are heading for 401(k)s and, to a much lesser impact, "Trump Accounts" may get stuffed with donated tech stocks.
Look ahead: The question for private market investors is if they believe past is precedent, or if they bet that this time is different, because AI is a more transformational technology than almost any that has come before it.
- One big bellwether should be the Anthropic IPO, whose roadshow is likely to begin in a week or so. If it cuts back its lofty valuation expectations, investors might gain courage in deal negotiations.
