Key Highlights

  • The impending $4 trillion AI IPO wave encompasses high-profile firms like SpaceX and OpenAI.
  • Underwriting fees for these deals range from 1.5% to 3.5% of offering proceeds, positioning banks for substantial gains.
  • Goldman Sachs is set to rake in $40-80 billion in IPO underwriting fees from AI companies between 2026 and 2028.
  • A single transaction, like Goldman’s handling of the SpaceX IPO, could yield $750 million in fees.
  • Analysts suggest Goldman Sachs may be undervalued by 15-20%, given the lucrative AI IPO fee wave not reflected in current earnings models.

The AI IPO Boom

The financial landscape is preparing for a seismic shift as a wave of initial public offerings (IPOs) tied to artificial intelligence (AI) companies emerges. With an estimated market value of $4 trillion, this surge will feature notable players such as SpaceX, OpenAI, Anthropic, and others. While individual investors might be tempted to chase these IPOs, a more strategic play involves focusing on the investment banks orchestrating these public offerings. Goldman Sachs, JPMorgan, and Morgan Stanley stand to benefit handsomely from the underwriting fees generated through these transactions.

A New Era of Underwriting Fees

The underwriting fees for AI IPOs are anticipated to range from 1.5% to 3.5% of the total offering proceeds. This represents a significant income stream for the banks involved. For instance, the underwriting of the SpaceX IPO, projected at $50 billion, could net Goldman Sachs an extraordinary $750 million, a figure that illustrates the scale of potential earnings. Given that Goldman’s entire annual revenue for 2020 was around $9.5 billion, this single transaction showcases the transformative impact of AI IPOs on bank revenues.

The Financial Implications for Investment Banks

Goldman Sachs (GS) and its peers are collectively positioned to earn between $40 billion and $80 billion in IPO underwriting fees from AI companies from 2026 to 2028. This fee generation event is expected to be the largest single-category in the history of investment banking. The implications for these financial institutions are profound: not only will they benefit from the immediate revenues associated with underwriting, but the near-pure margin on these fees will significantly bolster their profitability.

As the market prepares for this wave, the financial performance of these banks will likely outperform traditional revenue streams from M&A and trading.

Valuation Considerations for Goldman Sachs

Currently, Goldman Sachs is valued at approximately 12 times its forward price-to-earnings (P/E) ratio, reflecting the bank’s traditional business mix focused on M&A and trading revenues. Analysts are beginning to recognize that the impending AI IPO fee wave could add $3 billion to $5 billion in annual incremental revenue. This additional revenue stream is largely absent from consensus earnings models for 2027, suggesting that Goldman Sachs may be undervalued by 15% to 20%.

Investors focusing solely on the bank's historical performance may overlook the enormous potential coming from the AI sector.

Competing Dynamics in the Market

While the allure of investing directly in AI IPOs is strong, it is essential to consider the broader dynamics at play. The substantial fee revenue generated from these public offerings will not only enable banks to increase their competitiveness but also allow them to invest in further technological advancements. This creates a feedback loop where banks can enhance their AI capabilities, thereby attracting more lucrative deals in the future.

As the competition among banks heats up, those that can effectively leverage their expertise in AI will likely emerge as market leaders.