Global Equity Markets: Concentration and the AI Boom
Equity markets in 2025 remain unusually concentrated, with U.S. technology stocks, especially those linked to artificial intelligence (AI) dominating global indices. At the heart of this trend is Nvidia, now the world’s most valuable company with a market cap exceeding US$4 trillion. Its chips power nearly every major AI initiative and its share price has become a proxy for investor sentiment around AI.
Nvidia’s Expanding Role in AI Financing
Nvidia is no longer just a chipmaker. It’s now playing a major role in financing the AI ecosystem. Just last week, it reportedly committed up to US$100 billion to OpenAI (creator of ChatGPT), with the funds earmarked to purchase Nvidia’s own hardware. While this could lock in future revenue, it also ties Nvidia’s growth to OpenAI’s financial health. Notably, OpenAI isn’t expected to generate positive cash flow until 2029, despite projected revenues of US$125 billion.
Similar vendor-financing deals have been made with other AI firms, but they remain largely untested. If AI investment slows, the impact on Nvidia and by extension, global equity markets could be significant.
Historical Parallels and Emerging Risks
History offers cautionary tales. In the late 1990s and early 2000s, companies like telecom suppliers and General Electric used vendor financing to fuel growth, only to suffer when customers couldn’t pay. These models can amplify returns during booms but leave companies vulnerable in downturns.
Other risks to Nvidia’s dominance include:
- Customer competition: Major clients like Google, Amazon, Microsoft, and Meta are developing their own AI chips, which could reduce Nvidia’s pricing power.
- Geopolitical tensions: Export restrictions to China highlight the fragility of global supply chains.
- Rapid innovation cycles: AI hardware evolves quickly, meaning older chips may become obsolete faster than traditional tech investments.
Our View
Nvidia remains a technological leader, and AI is clearly transformative. However, with equity markets more concentrated than ever and investor expectations extremely high, we believe a prudent and selective approach is essential.