Capital Ideas: America’s Broken IPO Market Vs. The AI Gold Rush

Artificial intelligence is experiencing one of the most explosive investment booms in modern history. Billion-dollar seed rounds – once unthinkable – are now routine. But as former NASDAQ Vice Chair David Weild warns on the latest episode of ICAN’s Capital Ideas podcast, this surge is colliding with a capital-market structure fundamentally unprepared to support it.

The “Father of the JOBS Act” delivers a blunt diagnosis of what’s currently plaguing U.S. capital markets, and what must change if America hopes to remain competitive in an age of AI, robotics, and accelerating economic disruption.

AI at a Billion-Dollar Seed Valuation: déjà vu all over again

Seed-stage valuations have reached levels once unimaginable. In AI, billion-dollar seeds are no longer outliers; they’re symptoms of a frenzy in which investors front-load future value and compress years of public-market price discovery into early private rounds.

Weild compares the moment to prior innovation waves – Genentech in 1980, the dot-com bubble – but argues today’s distortion is uniquely extreme. AI is consuming nearly 50% of all venture capital, creating an overheated cycle where companies are priced not on fundamentals.

This distortion doesn’t stay contained. Elevated early-stage pricing ripples across the entire capital formation ecosystem:

• Follow-on rounds get squeezed.
• Exit expectations inflate beyond reason.
• IPOs become harder to price and easier to fail.
• Public investors inherit the risk once the valuation balloon is already full.

And an AI bubble carries a uniquely human cost: job displacement on a scale for which America is not prepared. Without a functioning IPO market – the engine of job creation and economic reinvention – the economy becomes, in Weild’s words, “vulnerable on its flanks.”

The IPO Market Is Mispriced by Design

A core theme of Weild’s critique is IPO mispricing: the last remaining form of “alpha” that Wall Street reliably delivers to its largest institutional clients.

Bulge-bracket banks often insist that a 40% first-day pop is necessary for an IPO to be considered a success. But that “success” comes from underpricing the offering and transferring enormous value away from issuers and into the hands of a tiny club of favored institutions.

As Weild puts it:

• “Seven percent gross spread is trivial compared to jamming somebody into having a 40% pop.”
• “The only alpha Wall Street can deliver… is underpricing equity offerings.”
• “We make deals work by underpricing them and distributing them to the same 60 institutions.”

This distorts the entire market:

• Retail investors are cut out of early gains.
• Companies raise far less than they should.
• Valuations become disconnected from fundamentals.
• Long-tail investors receive no coverage or support.

Underpricing isn’t a bug. It’s the remaining feature of a system built to serve the largest players.

Aftermarket Support Has Collapsed, and Few Want to Admit It

If IPOs are mispriced on day one, they are abandoned on day two. Weild’s assessment is blunt:

“One of the greatest lies on Wall Street today is, ‘We provide aftermarket support.’ They don’t.”

The reality he describes is stark:

• No outbound calls to generate buy-side demand.
• Research has been “devalued” by regulation.
• Liquidity is scattered across dozens of fragmented ATSs and ECNs.
• Trillion-dollar asset managers cannot touch small caps.
• Micro-caps and small-caps have zero natural liquidity.

According to Weild, aftermarket support has disappeared entirely for companies under $500 million market cap, and is barely present for those under $2 billion.

This “big missing link” was never fixed by the JOBS Act.

America Needs a New Market Structure and Not Another Patch

Weild argues the U.S. made a profound structural mistake: shifting from markets that served small issuers to a “one-size-fits-all” system optimized only for large-cap, highly liquid companies.

The consequences have been catastrophic:

• The IPO pathway stretched from 3–6 years to 10–15 years.
• The U.S. Treasury forfeited trillions as growth stayed private.
• Innovation became bottlenecked.
• Job creation slowed just as AI and robotics began demanding massive reskilling.

His prescription is straightforward and urgent:

“We need legislation for a small IPO market that takes companies public in 3 to 6 years. We would 10x the IPO market if we did it right.”

The Main Street Growth Act – which passed the House 406–4 – would have created such a market but died in a congressional cycle reset.

A Foundation Built to Fight Back

The newly launched Weild Foundation for American Competitiveness aims to correct course by producing rigorous, accessible thought leadership for policymakers, regulators, and the public with a mission to rebuild a capital market that funds innovation, supports small issuers, creates jobs, and keeps America globally competitive.

As Weild warns:

“If we don’t fix this, our kids and grandkids won’t have the opportunities that we enjoyed.”

Nick Morgan is President and Founder of ICAN, the Investor Choice Advocates Network, a nonprofit public interest litigation organization dedicated to serving as a legal advocate and voice for everyday investors and entrepreneurs.  He was previously a partner in the Investigations and White Collar Defense Group at Paul Hastings law firm.  Morgan previously served as Senior Trial Counsel in the SEC’s  Division of Enforcement. Capital Ideas is a series created by Morgan and Dara Albright.