Wealthy investors who bought private AI stakes ahead of this year's blockbuster listings may get one more strong run but Tom Ruggie expects an AI bubble to follow it.
Ruggie, the founder and CEO of Florida-based Destiny Family Office and its affiliated RIA, Destiny Wealth Partners, expects the debuts of the largest private AI companies to set off a buying spree.
"I think we have a period of time where AI related investments are going to go gangbusters and especially when a lot of these companies hit the public market, such as Anthropic and OpenAI," Ruggie told InvestmentNews. "What I anticipate having is a feeding frenzy where everybody has kind of the fear of missing out and you get that euphoric optimism and everybody's trying to invest. In my opinion … a bubble is going to be created."
He doesn't believe markets have reached that point. "Some people think we're in one right now. I personally don't, but I clearly believe that is going to happen," said Ruggie, who compared the setup to the dot-com era. "The Internet boom; hockey stick. Everything went up. And then unfortunately, at some point that bubble just bursts and there's a big adjustment."
The AI listings are already rolling. SpaceX began trading on the Nasdaq on June 12 after raising $75 billion in the largest IPO on record. Anthropic confidentially submitted a draft registration statement to the SEC on June 1 and could list as soon as November, Bloomberg reported in September, citing The New York Times. OpenAI CEO Sam Altman told Fortune on Sept. 11 that the ChatGPT maker will not go public this year.
For now, he argues, valuations among public AI leaders still rest on growth. "Use Nvidia as an example. The fundamentals, the valuation behind Nvidia based on how they're growing is not out of whack at all," he said.
He gives the rally another 12 to 18 months, pullbacks included. "I think the next 12 to 18 months are going to be some of the strongest performance months that we've had," he said. He went further on Anthropic, predicting it will be "the most successful public company perhaps ever."
Destiny offers clients direct stakes in late-stage, venture-backed private companies. Ruggie, who discussed the strategy in a video interview on AI, private markets and the bubble he sees coming, now says the best entry point for those pre-IPO deals has passed.
"I think we've passed the optimal time. That doesn't mean that there's not still some runway for certain companies," Ruggie said.
The firm's deal pipeline is thinner than a year ago. "We're coming towards the end of that cycle, but I don't think we're quite there yet," he added.
New deals now face a stricter test. "If I don't see a window where a company realistically could go public or get purchased by another company within the next 12 to 18 months, we're pulling the reins back on those offerings," Ruggie said.
Pre-IPO offerings aren't registered with the SEC, which warns that buyers face the risk that they could lose their entire investment. KPC Private Funds CEO Dean Rubino told InvestmentNews in July that advisors gain an edge through institutional-grade access rather than chasing pre-IPO deals directly.
As private holdings go public, Ruggie will recommend that clients at least take their initial investment off the table, which after big gains may amount to "5 or 10% of the entire value."
A broader cut could follow, including the Magnificent Seven stocks the firm is heavily invested in. "Within the portfolios we're managing, I'm just going to enact taking 20, 30, maybe even as high as 40% of chips off the table," he said. "And if history serves as any indication of what's going to happen, I'm going to be early."
Being early carries its own headache, he acknowledged, since clients bristle when markets keep climbing after a sale.
"I'm not a go-to-cash guy. I don't really believe in that methodology," he said. "If I'm wrong, we're still participating some, but if I'm right, we're still going to get hit on some, but we're also going to have a significant amount of dry powder on the sidelines."
The harder conversation comes after a drop, he said, when clients are afraid to buy back in. A July InvestmentNews column made the case for getting back to basics with fixed income as the contrarian move amid AI euphoria.
"The key that I tell my advisors is a balanced mentality," Ruggie said. "You can't get too upset when things aren't going well and you can't get too euphoric when things are going very well."
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