Cerebras Stock Offers a Clear Warning that Highly Anticipated IPOs from OpenAI and Anthropic Could Crash Back to Earth Fast

New fear unlocked: IPOs that rally, then tank.

Remember Cerebras (CBRS), which debuted just five weeks ago? 

The IPO priced at $185, the stock opened at $350, and shares peaked at over $386. Just as quickly as it went up, it came back down. The stock is now trading nearly 10% below its IPO price as of Thursday, June 25. 

This type of price action says to me that we’re arriving late to a party and that the next money to be made is on the downside.

This is not about Cerebras specifically, or any other company involved in artificial intelligence. It is about the excessive animal spirits that can take a company’s market capitalization to just shy of $100 billion, roughly the size of established sector leaders like Duke Energy (DUK) and Medtronic (MDT), and decide a month later that it should be worth $40 billion. This is how a day at the casino feels. Investing in the stock market is supposed to be a tool of diligent financial planning, not something akin to playing the slots. 

Why Are IPOs Flying, Then Crashing? 

When a highly anticipated technology company hits the public market, the initial enthusiasm can easily obscure reality. The recent Nasdaq debut of SpaceX (SPCX) is a perfect example of how massive media attention and retail crowding can temporarily decouple a stock price from standard market metrics.

If you are currently holding onto shares of a prominent listing in romantic anticipation of a multi-decade journey, you need to understand the risks of what Wall Street calls “price discovery.” We are more than a decade into investor-friendly liquidity conditions. That rug pull will bring some serious rug burn to portfolios. 

Cerebras had everything going for it when it went public. Positioned as a major semiconductor challenger to Nvidia, the AI chipmaker started trading with massive contracts from OpenAI and Amazon Web Services (AWS) in its back pocket.

Investors responded with absolute euphoria. They assumed that because the company’s wafer-scale AI technology was revolutionary, the stock price was guaranteed to compound higher forever. And THAT is what I believe is the disconnect. 

The sudden collapse of Cerebras reveals exactly how the market treats stocks priced for absolute perfection. The moment a business moves from the private sphere to the transparent public market, it faces severe structural hurdles, as CBRS just showed us. The company actually beat Wall Street estimates on raw revenue, but its earnings report revealed a tightening squeeze on forward gross margins. 

The market is no longer in an environment where investors will blindly reward top-line growth. If a business remains deeply unprofitable due to high operational expenditures, the valuation multiple will contract swiftly. An exceptional piece of technology or a massive backlog of contracted revenue does not guarantee that a stock price can escape the laws of financial gravity. 

With OpenAI and Anthropic due to join SPCX and CBRS as public companies later this year, keep this in mind. Losing big always sounds acceptable. Until it happens to you.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob’s written research, check out ETFYourself.com.