Investing.com -- The coming wave of large initial public offerings may weigh on forward equity returns and limit further multiple expansion, though it is unlikely to trigger a sustained bear market, BCA Research said in a note on Monday.

Chief Strategist Noah Weisberger said an analysis of 40 years of market history spanning approximately 12,000 IPOs shows that large IPO waves have historically been followed by softer forward returns and reduced multiple expansion.

"The coming IPO wave may dampen forward market returns, mute further multiple expansion, and possibly interrupt sector trends," Weisberger wrote.

However, BCA noted that the risk should be treated as a caution flag rather than a sell signal.

Only about 20% of mega-IPOs coincide with market peaks, the firm noted, meaning most large listings do not mark the start of sustained downturns.

Strong returns, expanding multiples, easier financial conditions, and a firmer economic cycle are all said to be pointing toward a meaningful pickup in IPO activity.

The more significant concern, BCA stated, lies within the technology sector. New AI-related listings could erode the scarcity premium currently embedded in existing AI beneficiaries by diluting their uniqueness and pulling capital toward newly listed alternatives.

"The bigger risk is AI leadership rotation as new listings dilute scarcity premia in existing winners," Weisberger concluded.