You may have seen that Nvidia, the US technology company whose chips train and run powerful generative AI models such as ChatGPT, overtook Apple and Microsoft on Wednesday to become the most valuable company in the world, with a market capitalisation of US$3.36 trillion.

Nvidia has been the world’s best-performing stock over the past quarter-century, posting a total return of over 591,000% since its IPO in 1999. The company has created more than US$2.0 trillion of value over the past 12 months.

Nvidia’s stunning rise is a testament to the huge global interest in AI. The company’s CEO, Jensen Huang, believes that Nvidia is at the centre of a new “industrial revolution”, unleashing the power of generative AI to transform the global economy through intelligent computing. The surge in the stock price is also a testament to the continuing power of public equity markets to reward companies which create genuinely new and transformative products.

In truth, however, the remarkable share price performance of Nvidia and a few other giant US technology stocks also highlights the imbalances of public equity markets. Global stock markets have become hugely concentrated, with performance driven largely by the US and largely by the technology sector. Meanwhile, unloved equity markets such as the UK have been stagnant, despite appealing valuations. It is an open question whether Nvidia really deserves to be worth 29% more than the UK’s entire FTSE 100 index, with an aggregate market capitalisation of USD2.60 trillion.

Equally significantly, there has been a major retreat from public equity markets over the past few decades, at least in developed countries. Since 2000, the number of listed stocks in the US has fallen from more than 7,000 to fewer than 4,000 as companies have been taken over or taken private. A similar trend has unfolded in Europe and the UK.

In most developed markets, there are few signs of a recovery in IPO activity. Smaller companies hoping to raise funds but wary of the financial and regulatory burdens associated with going public are generally still turning to venture capital or private equity funds rather than seeking to list.

The background of strong growth in the technology sector as a whole but subdued interest in public equity markets suggests that private M&A and private fundraising volumes in sub-sectors such as AI, cybersecurity, fintech and space should continue to strengthen, especially as global interest rates start to decline.