The divergence between the United States and Europe in terms of market capitalization (mcap) has become increasingly evident over the past decade. Currently, the US commands a market capitalization of about $61.74 trillion, which represents 53% of the total global market cap and over 70% of the market capitalization of developed economies. In contrast, Europe’s share of the global market cap has been in decline since the 2010s, now accounting for just about 15% of the market cap of the developing world. This widening gap is indicative of the increasing distance between the US and Europe in terms of economic growth, innovation, and capital markets.

Stark contrast in leading companies

The contrast between the market capitalization of the top companies in Europe and the US is striking. The top 10 companies in Europe collectively have a market cap of around $2.7 trillion, with leading names like LVMH, Novo Nordisk, and SAP at the forefront. While these companies are significant, they pale in comparison to the top 10 companies in the US, which boast a combined market cap of $20.7 trillion. The US giants-Apple, Nvidia, and Microsoft-are not only larger but have led the charge in market growth, outpacing their European counterparts by a considerable margin. This stark contrast highlights the growing dominance of US companies in the global market and the challenges Europe faces in reducing this gap. In recent years, the stock market performance of the US and Europe has diverged significantly. Between 2010 and 2025, the S&P 500 surged by over 415%, while the Eurostoxx 50 index only gained around 64.5% (in Euros).

Unicorns and Innovation: The U.S. Advantage

The U.S. leads global innovation, driven by its entrepreneurial culture and risk-taking. Over the past 15 years, this has fueled substantial growth in technology, healthcare, and financials. The U.S. also dominates in fostering unicorns, with 703 out of 1,400 global unicorns (Hurun Global Unicorn Index 2024), while the EU lags with 109. Many European unicorns even relocate to the U.S. for better growth opportunities.

Unicorns are crucial because they drive economic growth, attract talent, capital, and investment to their regions. But Europe faces several challenges-such as a smaller consumer market, stricter regulations, and a less developed venture capital sector-that hinder the creation and scaling of these high-growth companies. The US, on the other hand, benefits from a much larger venture capital industry, which is a key enabler for startups looking to scale.

The divergence in market capitalization between the US and Europe is a clear reflection of broader economic and structural differences. The US continues to lead in terms of innovation, economic growth, and capital markets, particularly with the rise of unicorns and the strong performance of US equities. Unless Europe can address these challenges and foster a more favorable environment for high-growth companies, the gap will only continue to widen.

Market Capitalization and the Technological Wave

However, when a country is at the peak of a technological wave, its market capitalization as a percentage of global market cap tends to be high. The United States has been leading technological innovation for nearly 150 years, starting from the automobile revolution. However, historically, when a technological wave reaches its peak and the trend corrects, the leading nation’s share of global market capitalization tends to decline.

For instance, in 2000, the U.S. had a dominant share of global market cap due to the internet boom, but by 2007/8, that share had dropped significantly. Meanwhile, Europe saw an increase, in its market cap as a percentage of the developed world market cap

Conclusion

Looking ahead, if history is any guide, we can expect a similar trend. As the current technology-driven bull run peaks and corrects over the next few years, U.S. dominance in global market capitalization is likely to shrink. On a relative scale, Europe is poised to perform better, attracting more inflows while the U.S. sees outflows. In the long term, the gap between U.S. and European market cap shares may not narrow significantly. However, in the medium term, as this technology wave matures and corrects, the U.S. share is likely to decline while Europe gains a larger share of global market capitalization.