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Key takeaways:
- IPO selectivity remains high and investors are focused on valuation, durable growth, profitability, and competitive differentiation.
Biotech and SPACs show notable resurgence. Biotech issuance rebounded strongly with solid aftermarket performance, while SPAC activity reached its highest level since 2021. However, de-SPAC completions continue to decline amid ongoing execution challenges.
Venture capital funding has become increasingly concentrated. Deal value is consolidating around category-leading AI companies and scaled platforms.
The US IPO market's recovery continued through the third quarter of 2026, though momentum cooled late in the period as rising bond yields and a handful of high-profile postponements tested investor appetite. Through September 30, 83 traditional IPOs raised over $120.2 billion, compared to 60 that raised over $29.3 billion during the same period in 2025.
While SpaceX accounted for a significant portion ($75 billion) of year-to-date proceeds, issuance excluding that transaction still totaled approximately $45.2 billion, already above the $41.2 billion raised during all of 2025. Following a record-setting second quarter, issuance moderated during the seasonally slower summer months and September. Year-to-date proceeds are now approaching levels last seen during the 2021 IPO cycle.
During the third quarter, 18 traditional IPOs raised approximately $6.1 billion. Pharma and life sciences led third-quarter issuance, with nine biotech companies pricing offerings through the end of September, extending the sector’s resurgence from the second quarter. Activity also included consumer, technology, and energy-related issuers, including two offerings of approximately $1 billion.
More recently, the IPO market has begun to show signs of greater selectivity. During September, six sizeable offerings spanning consumer health, nuclear energy, insurance, advanced manufacturing and technology were postponed or withdrawn after entering the market. Beyond these, several additional issuers that had publicly or confidentially filed have reportedly delayed or altered their IPO timelines, suggesting that the shift extends beyond transactions already in the market.
Rising interest rates and Treasury yields, weakness across certain public-market peer groups, weaker IPO aftermarket performance, questions around the pace and durability of AI infrastructure spending, and changing investor appetite have raised the bar around valuation and execution. Uncertainty ahead of the midterm elections is also potentially influencing timing decisions. While the IPO window remains open, recent activity reinforces that market conditions can change quickly and that strong fundamentals alone may not be sufficient if valuation and structure do not align with investor expectations.
That greater selectivity is also evident in aftermarket performance. Through September 30, IPOs priced in 2026 have returned approximately 2% on average compared to a 12% gain in the S&P 500. Performance has varied significantly across sectors, with several biotechs and other growth-oriented issuers delivering strong returns, while AI infrastructure, consumer, and defense-related offerings faced greater pressure. The divergence further underscores investors’ increasing focus on valuation, growth expectations and execution.
AI remains one of the defining themes of the 2026 IPO market. Following several successful AI infrastructure offerings earlier in the year, investor attention is increasingly moving toward a potential next wave of large-scale AI platforms. Anthropic, which confidentially filed for an IPO in June, is reportedly preparing for a public offering in what could become one of the largest IPOs in history. OpenAI also confidentially filed during the second quarter, but has since ruled out a 2026 offering, with management citing the current environment. The performance of these companies will likely provide an important barometer of how investor appetite extends from AI infrastructure to the model and application layers of the AI ecosystem.
The broader IPO pipeline is deepening as well. Companies across energy infrastructure, nuclear power, consumer, technology, and financial services have filed or taken steps toward potential offerings. With a significant backlog of private companies still seeking liquidity, successful execution by the current pipeline could support continued issuance into the fourth quarter and 2027. However, the growing supply of IPO candidates may also increase competition for investor attention and reinforce the importance of valuation discipline and readiness.
The macroeconomic backdrop remains supportive despite continued uncertainty about inflation and interest rates. Economic growth has remained resilient, supported by consumer spending and continued strength in business investment, particularly technology-related spending. At the same time, inflation remains a key focus as tariff-related price pressures and energy market disruptions add uncertainty to the outlook. Against this backdrop, the Federal Reserve raised interest rates by 25 basis points in September, as inflation remained above target, signaling a more restrictive policy environment, while updated projections suggest additional tightening could still be needed before year-end.
IPO market recovery continues, but the bar for new issuers rises
The third quarter’s largest IPO was Csquare, a data center company that raised $1.1 billion. Shares have declined approximately 25% since pricing, with investors weighing the company’s exposure to attractive AI and digital infrastructure themes against its relatively high leverage. The performance highlights continued selectivity around valuation, balance-sheet risk, and execution, even for businesses in favored sectors.
Jersey Mike’s completed the quarter’s second-largest IPO, raising $1 billion in what was one of the largest restaurant IPOs in recent years. The transaction demonstrated that the IPO market remains accessible beyond tech and healthcare, with investors continuing to support scaled consumer businesses with established brands, durable growth, and attractive financial profiles. Still, shares have declined 27% since pricing, highlighting continued investor selectivity around valuation and growth expectations in the aftermarket.
In addition, through September 30, 22 biotech companies raised $6.9 billion, compared to just seven IPOs raising $1.4 billion during all of 2025. The 2026 biotech class has also performed strongly, returning approximately 42% on average since pricing.
SPAC issuance has continued to increase, reaching its highest level since 2021. Through the first nine months of 2026, 153 SPAC IPOs raised $27 billion, compared to 100 SPAC IPOs raising $18.8 billion during the same period in 2025. This reflects continued investor appetite for experienced sponsors and the optionality offered by the SPAC structure, where capital is raised before a specific acquisition target is identified.
Despite the rebound in SPAC issuance, de-SPAC activity continues to decline. Through the first nine months of 2026, only 27 de-SPAC transactions were completed, compared to 35 during the same period in 2025. The widening gap between new SPAC formation and completed business combinations highlights continued execution challenges and investor selectivity in the de-SPAC market. Investors remain willing to provide capital to established sponsors while applying a higher bar when evaluating specific acquisition targets, valuations, and transaction structures.
VC activity continues to concentrate
Venture funding is becoming increasingly concentrated in a small number of large transactions. The 23 largest rounds accounted for 38% of total deal value during Q3, reflecting continued investor conviction in category-leading AI companies. This dynamic is supporting aggregate funding levels while leaving many companies outside of the core AI themes facing a more selective market.
Corporate investors remain an important source of capital for AI-related businesses. Strategic investors participated in $24.3 billion of AI deal value during Q3, with activity concentrated in infrastructure, data, cybersecurity, and enterprise applications. Their continued involvement is providing validation and financing capacity for select companies while also reinforcing the competitive advantages of businesses with established strategic relationships.
Capital formation is shifting from broad experimentation toward scaled AI platforms and infrastructure. Companies operating in foundation models, compute, data infrastructure, and semiconductor-related categories attracted $21.1 billion of Q3 funding, compared to $18.1 billion in the same period last year. While investor demand remains strong for businesses that can support the AI buildout, the capital intensity of these sectors is increasing the importance of scale, technical differentiation, and access to strategic relationships.
Early-stage investing remains active but disciplined. Series A deal value totaled $10.8 billion during Q3, compared with $13.4 billion in the prior quarter, reflecting continued investor willingness to fund compelling businesses. At the same time, though, underwriting standards remain focused on monetization, capital efficiency, and execution certainty.
Secondary transactions continue to play a larger role in the venture ecosystem. LP-led, GP-led, and company-sponsored transactions provide targeted liquidity for high-quality assets, particularly those with AI exposure or demonstrated operating momentum. While the market is becoming a more established source of liquidity, pricing and buyer demand remain highly dependent on asset quality and valuation expectations.
Fundraising conditions remain challenging for many managers. Capital continues to gravitate toward larger, established platforms with stronger track records, differentiated sourcing, and the capacity to support portfolio companies through longer holding periods. For many emerging managers, fundraising cycles remain longer and increasingly dependent on demonstrated liquidity outcomes and portfolio performance.
A broader venture recovery will likely depend on whether AI-related momentum can extend beyond a narrow group of companies and sectors. Investors remain constructive on innovation but are deploying capital selectively and with greater attention to downside protection. Until funding and exit activity broaden more meaningfully, headline deal value may continue to overstate the underlying health of the venture market.
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