“The only thing we have to fear is fear itself,” noted US President Franklin Delano Roosevelt in his 1933 inaugural address at the height of the Great Depression.

Fear, and greed on the flipside, are often classed as the two primal emotions driving stock markets.

The ongoing market scare over the sustainability of AI valuations is a stark reminder that fear is often the more dramatic force of the two. Just as the US economy needed firm leadership and the striking of a “New Deal” to overcome significant challenges, so, too, will European sponsors need to show discipline in building long-term value if next year’s IPO pipeline is to be as successful as many ECM watchers hope.

A surfeit of seller greed would fare badly against a wall of investor fear. Since its most recent high in late October, the Nasdaq Composite is down around 7%, dangerously close to a 10% market correction. The S&P 500 is down around 4% over the same period.

If heavy end-of-year losses are sustained – with no leavening Santa rally – concerns will mount about stock market sentiment into 2026.

One telling indicator of a market vibe shift is when investors pore over good news to find evidence backing bearish narratives. NVIDIA, the world’s most valuable company and the crucible of global AI expansion, reported strong analyst-beating results on 19 November. That was enough to send its stock and the rest of the market higher the following day. A sigh of relief was felt at NVIDIA and its rockstar CEO, Jensen Huang, riding to the rescue.

And yet. No sooner had the champagne corks fallen to the floor than questions began to be asked about NVIDIA customers’ projected return on investment and the chip giant’s contractual relationships – particularly whether there is any read-across from Lucent Technologies’ vendor financing travails as the dotcom bubble burst more than 20 years ago.

Investors began selling NVIDIA and other tech stocks again, driving the Nasdaq down from a 2.44% intra-day gain to a 2.07% loss from the previous close by the end of the session – a huge 4.5% daily swing.

The fact that NVIDIA’s big earnings beat was not enough to reverse days of selling is a sign that growing market fears over AI valuations are calcifying into a bearish consensus.

Good IPOs can overcome fear

Bankers this side of the pond have been nervously watching as US markets continue to drop off into the year-end. Despite this backdrop, Europe’s major dealmakers are hopeful that a pipeline of large cash-generative businesses will demonstrate enough quality to withstand growing investor nerves and make it to public markets next year.

Several very large deals are expected in 2026, with many eyeing a first-half listing. These include the possible London IPOs of Visma, with IVC Evidensia pencilled in for later in 2026.

Also on the large-cap IPO agenda are the listings of defence businesses Czechoslovak Group (CSG) and KNDS, both possible in the first half, according to coverage by this news service. Also, watch out for a possible Frankfurt debut for Mobile.DE, should a listing prove more attractive than a sale for sponsors Blackstone and Permira.

“There are a lot of big names for the first half and an awful lot in the second half; a 5%-10% contraction is fine, but a true bubble burst would be different. Everyone has been following this market and if it were to crash, that would be painful,” said an ECM banker.

One other senior banker noted that despite growing fears around AI, he was “incredibly constructive” on 2026, for both IPOs and large-cap M&A.

“Markets certainly seem to be flashing worrying warning signs,” said a third, noting that Europe’s pipeline for next year, and even 2027, contained a far broader mix of businesses than the traditionally tech-heavy US issuance calendar.

“I am a little but happier with Europe, in that respect, given the IPO pipeline has a broader base – it isn’t just dependent on AI and tech,” he added. There are many defence assets alongside fintech and banking names that people are showing an interest in, and these are themes that play well in a worse environment.

“We have also not transitioned to a fully functioning IPO market in Europe, despite a better year and there are still very few mid-cap businesses coming through, so that means the broader pipe is more naturally geared towards these larger deals, which in more negative markets is better,” the third banker added.

Sellers need to adapt

ECM investors have told this column throughout the year that they are open to looking at IPOs, even when the market is more bearish, so long as the business quality is high and the structure and price take valuation conditions into account. The question remains – will issuers come to the table, particularly private equity firms?

A host of sponsors still need to deliver returns to LPs by exiting assets, particularly given that many are starting to fundraise for new vehicles, a fourth banker said.

But if pricing needs to drop to get deals across the line, it could lead to some sponsors kicking the can down the road.

“The IPO greenshoots are there and PE now really does have the option of a proper dual-track, both M&A and a real IPO option,” said the second banker. “The main problem we’ve had, though, in the last few years isn’t that there hasn’t been investor demand for IPOs, it’s that many issuers just don’t like the price.”

While short spikes of volatility are a nightmare for markets, headline equities can bounce back fast, as was shown following US President Donald Trump’s Liberation Day tariff shock. Recovery each time the TACO trade was shown to be a solid call was equally as dramatic as the declines Trump’s trade broadside catalysed.

Admittedly, the AI bubble bursting could be viewed as more systemic, potentially leading to a longer period of difficulty for IPOs.

“The problem, though, in the case of several of these big PE assets is there isn’t really another option to an IPO,” said the second banker. Sponsor success in scaling their assets can make a further secondary sale problematic to execute, with public markets the surer exit route.

By January, market fear over AI might have abated and equities could be back off to the races. But trading in the wake of NVIDIA’s results seems to augur a more serious shift in sentiment.

If that feeds through to next year, high-quality large businesses — like many of those populating Europe’s 2026 pipeline — still have a chance of making a public markets debut.

The question will be whether sellers are brave enough to show pricing restraint, with an eye to delivering solid returns over the full lifecycle of the staged exit — from IPO through to block trades.

High-quality assets with well-structured deals will not only survive but thrive in a period of market fear — so long as seller greed doesn’t poison the well.