(Yicai) May 7 -- With the advent of the silicon age, only a very small number of companies can create huge value, while most firms are destined to remain mediocre. This not only means that past stock valuation methods are no longer applicable, but will also have a profound impact on employment and wealth distribution.

In 2025, the combined profits of the seven US tech giants -- Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla -- amounted to USD567.3 billion, while the total profits of the 500 companies covered by the S&P 500 index reached USD2.1 trillion. The seven tech giants accounted for 27 percent of the total, while their market capitalization represented an even higher share of around 33 percent to 35 percent.

This phenomenon indicates that we are entering an increasingly polarized era. A small number of companies are capturing a significant share of society’s profits, with extraordinarily high profit margins. These firms belong to the silicon-based development model, while the majority of traditional enterprises are struggling to survive.

Among companies with a market capitalization exceeding USD1 trillion in the US stock market, all except Walmart are silicon-based enterprises. Over the past 30 years, traditional manufacturing, energy, telecommunications, and financial firms have gradually dropped out of the top 10 by market capitalization in the US stock market.

In the silicon age -- an economy increasingly driven by semiconductors, AI, data, and digital technologies rather than traditional industrial production -- AI enterprises can generate far more wealth than traditional businesses, driving gross domestic product growth.

However, this trend will also widen the gap between the rich and the poor and increase pressure on employment. According to statistics from the Federal Reserve, the top 1 percent of wealthy people in the US hold about 50 percent of the total stock market value, while the bottom 50 percent hold only about 1 percent.

Moreover, although tech giants have enormous market capitalizations, they create a limited number of jobs. Last year, the combined workforce of the seven giants totaled about 2.5 million employees. Nvidia, which has the world’s highest market capitalization, employed only 36,000 people. In addition, these companies are carrying out large-scale layoffs to cope with rising capital expenditures.

China’s Different Market Structure

In China, the situation is different. Companies with large market capitalizations in the mainland stock market are still mainly traditional industries and state-owned enterprises. The trading activity of these stocks is relatively low, and their valuations are comparatively cheap. Meanwhile, smaller companies tend to have higher valuations and more active trading. Therefore, the degree of market polarization is less pronounced than in the US stock market.

In terms of employment, the gap in workforce size among Chinese internet companies varies significantly because of differences in business models. For example, Tencent Holdings, which mainly operates in gaming and social media software, has a market capitalization 13 times that of e-commerce giant JD.Com, but employs only about one-ninth as many people.

In the silicon age, the assessment of an enterprise should consider not only its commercial value but also its social value. For example, price wars among internet companies can lead to the misallocation and waste of social resources, while the large number of flexible workers created by the internet economy may also place pressure on the social security system.

When the high-growth period of the AI industry eventually ends, these highly profitable but low-employment silicon-based enterprises may face the bursting of a market capitalization bubble, similar to the collapse of the dot-com bubble. In the long run, this could be beneficial, as it may help the market return to rationality and further improve the efficiency of resource allocation through market competition and consolidation.

However, before that happens, appropriate countermeasures should be formulated in advance to reduce the risks that the collapse of the AI bubble could pose to various industries. At the same time, new jobs should be created by vigorously developing service industries to cope with the significant decline in employment demand in the silicon age.

The author, Li Xunlei, is the chief economist of Zhongtai Securities.

Editors: Dou Shicong, Emmi Laine