"The Roaring Twenties" Return! Bank of America’s Hartnett Warns: SpaceX’s Super IPO Will Ignite an Epic Bubble

SpaceX is about to land on the US stock market, pushing the entire market to the edge of historic frenzy—precisely the reason why one of Wall Street’s most influential strategists is sounding the alarm.

In his latest report, Bank of America strategist Michael Hartnett warned that once super IPOs such as SpaceX and OpenAI come to fruition, the weight of tech stocks in major equity benchmark indices will easily surpass around 48%, exceeding all previous historic bubble periods’ market concentration levels, including the "Roaring Twenties," the "Nifty Fifty" era of the 1970s, the Japanese bubble of the 1980s, and the dot-com bubble in the 1990s.

Earlier, Bank of America’s latest fund manager survey showed that the scale of US stock allocations by investors hit a new record this month, with market bullish sentiment nearing extreme levels, triggering sell signals.

At the market level, anticipation of SpaceX’s IPO has already set off a collective frenzy among space-themed stocks. Bank of America’s tracked basket of core space sector stocks has risen 42% so far this year, outperforming both the S&P 500 Index and Nasdaq 100 Index. Analysts have compared this phenomenon to how Tesla sparked the entire electric vehicle sector’s rally in the past, yet some have warned that after the hype fades, whether smaller and mid-cap companies can support their valuations based on fundamentals remains unknown.

Concentration Alert: Tech Weights Approaching Bubble Red Line

The weight of tech stocks in the S&P 500 Index has already surpassed 44%. Hartnett points out that once SpaceX and OpenAI go public, adding to the scale of existing artificial intelligence giants, market concentration will "easily surpass" the peak level of about 48% seen during all previous bubble periods in history.

“Strong price action, retail investor frenzy, low volatility ... the bubble atmosphere is palpable,” Hartnett wrote in the report. “Adding super IPOs to the league of AI giants means market concentration will easily exceed the 48% market share of the Roaring Twenties, Nifty Fifty, Japan’s 1980s bubble, and the TMT 1990s.​”

This concentration issue is especially tricky for asset allocators. Due to risk management constraints, many institutional investors cannot fully track the ultra-high weights present in benchmark indices, and pressure to passively deviate will continue to intensify. Moreover, an index heavily tilted toward technology may obscure the structural weaknesses lurking in sectors such as consumer and financials that are more closely tied to the real economy.

Historical Precedent: Super IPOs Not Always Market Catalysts

After reviewing several major IPOs in history, Hartnett pointed out that the listings of Saudi Aramco and Meta (formerly Facebook) had limited impact on market performance, while the listings of "peak" names like Visa and AIA actually saw the broader market decline within 9 to 12 months after going public.

This historical pattern provides an important reference for the current optimism. Hartnett notes that a sharp rise in bond yields has been the common trigger for the end of every boom and bubble.

He also offered two indicators to watch: if the State Street ETF tracking biotech stocks drops to $120, this means bond yields are still rising; if the retail ETF rises to $85, it suggests the bond yield shock has temporarily eased.

Hartnett also pointed out that the current market consensus has reached a “maximum bullish” state, with both positioning and earnings expectations at highs, coupled with the pressure of rising yields, suggesting investors consider taking some profits.​"But before a historic IPO arrives, no one will reduce their long positions," he added, and expects that only after CPI hits 4% to 5% in the coming months will genuine policy tightening begin.

Space Sector Mania: SpaceX Effect Replicates Tesla Moment

SpaceX officially submitted its IPO application this Wednesday. Based on comparable listed company valuations, its market cap is expected to be between $864 billion and $2.25 trillion, whereas Tesla and Meta currently each have a market cap under $1.6 trillion.

This expectation has already triggered a strong resonance among space concept stocks.

Bank of America’s space sector basket has risen 42% cumulatively this year, and both Procure Space ETF and Tema Space Innovators ETF have posted double-digit returns.

Wedbush analyst Dan Ives called SpaceX’s IPO the "golden moment" for the entire space industry, comparing it to how Tesla defined the electric vehicle sector: "This isn’t just about one company. Just like Tesla defined EVs, there are similar qualities here in terms of creating a new track."

Tech investor Brett Hurt stated that SpaceX’s IPO "is a massive win for the space economy, which will lift the valuations of other companies and further enhance their financing abilities."

After the Hype: Can Small and Mid Caps Support Their Valuations Independently?

However, the other side of the Tesla effect is also worth noting.

Amid the electric vehicle boom, Rivian’s stock price has plunged 92% from its November 2021 peak, and XPeng’s ADRs are down 78% from their November 2020 high. Tesla itself broke into the “tech giants” club through relentless scaling, but others in the sector have faced very different fates.

Eric Diton, President and Managing Director at The Wealth Alliance, stated bluntly that after SpaceX goes public, smaller space companies will face the pressure of proving their independent value: “The market will scrutinize each company—my first question is: How do you compete with Musk and SpaceX? Do you have a competitive advantage?”

Columbia Law School professor Eric Talley also pointed out that investors’ feverish enthusiasm for all Musk-controlled assets is hard to dispel, but the issue of Musk’s attention being divided across multiple executive roles should not be overlooked.

ProcureAM co-founder and CEO Andrew Chanin holds a relatively optimistic view, believing the space track is not a "winner-takes-all" situation. The market is broad enough for multiple successful companies, but failures are also inevitable.