Investors seeking a slice of a possible blockbuster AI flotation might sell something they already own to pay for it. That is the portfolio risk behind Evercore ISI’s warning reported September 7. International Business Machines Corporation (NYSE:IBM) and AppLovin Corporation (NASDAQ:APP) appeared on its screen of potential casualties.
Julian Emanuel’s team identified underperformers with negative earnings-revision trends that could face additional pressure as investors prepare for possible OpenAI and Anthropic listings and seasonal tax-loss selling. The screen describes vulnerability. It does not establish that a fund has sold either stock to finance an IPO, or that those listings will happen on a fixed timetable.
The same selling pressure would meet different businesses
For International Business Machines Corporation, the challenge is restoring operating momentum. Its second-quarter results showed software revenue growing 5% to $7.8 billion, with Red Hat up 11%. Hybrid cloud remains a plausible way to benefit as enterprises deploy AI across existing systems, rather than abandoning their infrastructure wholesale.
Yet infrastructure revenue fell 7%, with IBM Z down 42%. Free cash flow declined $300 million to $2.5 billion. A portfolio-driven selloff would therefore arrive while investors already have reasons to question execution. The bullish rebuttal requires improving business results, not merely arguing that the stock has fallen enough.
AppLovin Corporation presents a different tension. Its June-quarter revenue rose 53% to $1.924 billion, and it generated $863.3 million of free cash flow. Its advertising platform gives investors an existing commercial application of AI, with customers paying for measurable marketing outcomes. That cash generation could support resilience even if enthusiasm shifts toward newly listed AI developers.
The risk is sustaining those results in a competitive advertising market while scaling to new customers. Management explicitly flags forecasting, competition and execution risks. Strong historical growth cannot guarantee future returns, and a share-price decline does not independently prove undervaluation. Conversely, investor demand for a new AI listing does not by itself reduce the returns advertisers earn from AppLovin’s existing service.
Q2 filings showed no broad retreat from these stocks
Insider Monkey counted 74 IBM holders at June 30 versus 59 at March 31. AQR Capital Management increased IBM shares approximately 42% to 2,688,952. AppLovin’s count fell from 91 to 88, while Kensico Capital reduced its shares approximately 3.1% to 3,182,850. Neither disclosure establishes an IPO-related motive.
AppLovin’s August 14 short interest was 11,372,027 shares, 3.9% of float, with 1.4 days to cover. Evercore’s scenario merits monitoring, but the decisive distinction remains whether weaker prices reflect temporary portfolio adjustments or deteriorating future business economics.
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