Large IPOs have been capturing plenty of attention lately, and for good reason. These businesses (you know who we’re talking about) are among the most innovative and influential companies ever created. Their products may reshape industries, change the way we live and work, and create enormous economic value over time.

But history teaches us an important lesson: A great company—or even a great idea—doesn’t always make a great investment.

That’s especially important to remember when enthusiasm is running high and investors are eager to participate in what feels like “the next big thing.”

The Disconnect Between Hype and Returns

One of the hallmarks of a bull market is growing enthusiasm for a relatively small segment of the market. Today, artificial intelligence is an obvious example, but we’ve seen similar patterns throughout history around transformative technologies and industries.

The story is often compelling—these companies possess tremendous growth opportunities and dominate headlines for months or even years—they could be revolutionary. And so, their future potential appears enormous.

The challenge is that markets are forward-looking.

When investors become excited about a company, they don’t wait for future success to act. They price that success into the stock immediately. As a result, much of the optimism (and growth potential) surrounding a company may already be reflected in its valuation long before that growth materializes.

That doesn’t mean the company will fail—in fact, many of these businesses go on to become incredibly successful. But the margin for growth (at least where stock prices are concerned) has been prematurely narrowed.

So you have to ask yourself: Have expectations become so elevated that even excellent execution may not justify the current price?

History Doesn’t Repeat, But It Often Rhymes

We’ve seen this dynamic play out before.

In the 1970s, investors became enamored with a group of stocks known as the “Nifty Fifty.” Companies like Coca-Cola, McDonald’s, IBM, Xerox, and Polaroid were viewed as dominant businesses with virtually unlimited growth potential. Many investors believed they could be purchased at just about any price because their future success seemed inevitable.

Decades later, the internet boom of the 90s created a similar environment. In both cases, investors largely got the story right. These innovations changed the world. What many got wrong was the price they were willing to pay for that future growth.

The lesson? A great company is not necessarily a great investment at today’s price.

The Irony of Major IPOs

One reason major IPOs tend to generate so much attention is that they often arrive during periods of elevated optimism. Media coverage increases, stories of wealth creation spread quickly, and everyone wants to get in on the “next big thing.”

From the company’s perspective, this is a favorable environment. Investors feel like they need exposure before they “miss out” (hello, FOMO), and demand rises dramatically. That allows the business to go public at higher valuations than they might receive during less enthusiastic seasons.

For investors, however, that same enthusiasm can create challenges. Fear of missing out can encourage aggressive bidding and push valuations higher than the business actually supports.

Ironically, this is one of the reasons many IPOs have historically underperformed broader public markets over longer periods. Investors make decisions based on projections, stories, and possibilities rather than established operating results.

Yet if investors were to wait just a few quarters after the company went public, they would have access to much more information. Earnings reports could provide additional insight, management’s ability to execute would become clearer, and valuation metrics would be easier to assess. Plus, lock-up periods would expire and allow early shareholders to sell.

All this could mean the opportunity to buy in at a more reasonable valuation, or determine whether the company is worth the investment in the first place.

What This Means for Investors

To be clear, we’re not suggesting that markets are at a top or that a correction is imminent. What we are saying is that elevated optimism deserves attention.

When we start seeing multiple trillion-dollar companies coming to the market, it could be a sign that investor enthusiasm is running high. That doesn’t automatically signal trouble ahead, but it does suggest we should be thoughtful in our decision-making.

The next generation of transformative companies may very well justify the excitement surrounding them. But before chasing the latest headline, it’s worth remembering that long-term investment success is rarely determined by finding the most exciting story. More often, it comes from evaluating fundamentals, maintaining discipline, and resisting the urge to let emotions (in this case, FOMO) drive decisions.