The biggest winner is not AI! Biotech has become the dark horse of US stock market IPOs, with an average return of 55%, far outperforming the overall market.

This year, the biggest winner in the United States' initial public offering (IPO) market was not an artificial intelligence (AI) company, but rather the biotechnology sector. Driven by improving industry fundamentals, active mergers and acquisitions among large pharmaceutical companies, and continued capital inflows, biotechnology IPOs have outperformed the overall market significantly, attracting more and more companies to speed up their listing process during the summer window. Data shows that since 2026, the weighted average return on investment for US biotechnology and pharmaceutical company IPOs has reached 55%, while excluding special purpose acquisition companies (SPACs) and other financial instruments, the overall weighted average return for the US IPO market is a loss of 4.4%. Strong market performance is driving companies to accelerate their listings. Just this month, at least 6 biotechnology companies have submitted IPO applications, including Scribe Therapeutics, which focuses on CRISPR gene editing therapy. These companies are expected to complete their listings by the end of July to early August, securing financing before the traditional slow season in the IPO market begins. Jack Bannister, Senior Managing Director of Equity Capital Markets at investment bank Leerink Partners, said, "This is the healthiest biotechnology IPO market in recent years." The market had initially expected 2026 to be a big year for AI, aerospace, defense company IPOs, with SpaceX's potential record-breaking IPO being highly anticipated. However, with investors starting to worry about overvalued AI stocks, the stock prices of the largest 10 IPOs in the US this year have already decreased by an average of 6.3%. The hype around AI stocks has significantly cooled down. In contrast, the biotechnology sector continues to attract funding. Factors driving the industry's leading performance include the NASDAQ Biotechnology Index rising by approximately 13% year-to-date, a stable regulatory environment, positive breakthroughs in clinical trials, and large pharmaceutical companies continuing their merger and acquisition activities. In the past month, the industry has seen three large acquisition deals exceeding $10 billion each, including AbbVie acquiring Apogee Therapeutics, GlaxoSmithKline acquiring Nuvalent, and Vertex Pharmaceuticals acquiring Crinetics Pharmaceuticals. These deals have not only boosted the industry's overall valuation but also provided exit funds for investment institutions, further flowing back into the IPO market. Seth Rubin, Head of Global Equity Capital Markets at Stifel Financial, said that some large funds globally are continuously increasing their allocation to the healthcare sector, and the outstanding returns of small and medium-sized biotechnology companies have further enhanced investors' confidence in the industry. Data shows that as of now, the number of biotechnology IPOs in the US in 2026 has already exceeded the total of 8 for the entire year of 2025. However, compared to the peak during the pandemic period of 2020 to 2021 when over 200 biotechnology companies went public, the market is currently in a relatively rational recovery phase. Rubin stated that the market has not shown signs of overheating yet, and the overall pace of financing remains healthy. In terms of fundraising size, the total amount raised by US biotechnology IPOs this year has exceeded $5 billion, triple that of last year. Parabilis Medicines, which focuses on the treatment of rare cancers, completed a $770.6 million IPO last month, setting a new record for the largest IPO in the history of the US biotechnology industry. In terms of individual stock performance, Veradermics, a company focused on developing hair loss treatments, has risen over 500% since its listing in February this year, becoming the top-performing new stock in the US in 2026. Hemab Therapeutics, focusing on the treatment of blood diseases, has also seen its share price more than double since its IPO in May. However, market insiders still warn that if the Federal Reserve maintains high interest rates longer than expected, the biotechnology industry may still face valuation pressures. Since biotechnology companies generally rely on future cash flows for valuation, an interest rate hike cycle historically puts pressure on the sector. Bannister stated that interest rate hikes could indeed be a risk factor for the industry in the future, but currently, the trend of the biotechnology sector is clearly independent of the AI market and has not been significantly impacted by interest rate factors. He said, "Funds will always seek allocation directions. Compared to other current investment opportunities, biotechnology is not only a relatively stable safe haven, but also still has a significant upside potential."