Concentration Profits and Competitive Landscape Ahead of AI Disruption

US corporate concentration and profit margins are at record highs, driven primarily by technological advancements that favor large-scale firms. While AI could disrupt incumbents, history suggests it is more likely to further entrench market leaders through network effects and high fixed deployment costs.

Key Takeaways

• 1.Corporate concentration in the US has risen steadily since the 1930s, with the sales share of the top 1% of firms increasing from ~60% in the 1960s to ~80% recently.
• 2.Technological change is the most compelling explanation for rising concentration, as it allows firms to leverage economies of scale and network effects.
• 3.Rising concentration is responsible for approximately one-third of the total increase in US corporate profit margins since 2000.

Table of Contents

• Concentration, Profits, and the Competitive Landscape Ahead of AI Disruption
• The Long-Run Rise in Corporate Concentration
• What Explains the Rise in Corporate Profit Margins?
• AI's Implications for Concentration and Profitability
• The US Economic and Financial Outlook
• The US Economics Team
• Disclosure Appendix

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