Market Concentration Rarely Lasts

April 2025

Investment views from our
partners at Walter Scott

The recent AI-driven surge has led to market concentration levels not seen for decades, with ten companies accounting for more than 20% of the market.¹

We do not see such concentration often but there is market precedent. From the established blue-chip giants of the 1970s to the mobile telecommunications and internet companies of the early 2000s, stock markets have experienced periods where a select few companies have held significant dominance. However, as the chart shows, these eras of market concentration rarely last.

What happened to these once dominant companies in subsequent decades? Dropping out of the top 10 could be due to any number of factors, from industry consolidation to regulation or a failure to innovate and adapt. Whatever the reason, it suggests that investors should be cautious about extrapolating today’s market trends too far into the future.

Long-Term Leaders

Some companies do feature in the top 10 from one decade to another (and another). Until recently, companies such as Exxon, General Electric, and IBM were prominent members of the group regardless of market trends.

Today, Microsoft appears to be one of those staying the distance, having been there in the early 2000s and now very much part of the AI story. We believe this speaks to the software company’s continued ability to innovate and adapt from a leader in software to being at the forefront of AI, having first invested in OpenAI in 2019. More recently, it has incorporated Copilot, an AI-powered digital assistant, into Word, PowerPoint, Outlook and Excel. Looking to 2030 and beyond, we believe Microsoft has the potential to keep its leading position in the AI theme.

Another company that we believe has staying power is Alphabet, a business which has built up a prominent position in online advertising and search through Google. Like Microsoft, it has also been in the AI game for years, having bought the UK-based AI research laboratory DeepMind back in 2014. Alphabet, in our view, has a strong long-term competitive position due to its ownership of multiple platforms with billion-plus users, strong data-gathering capabilities, proprietary hardware and mobile operating systems (Android).

Beyond Sentiment

It’s still very early days for AI and progress is rarely linear. While we believe many of today’s market leaders will likely continue to play an important role in the AI ecosystem for decades to come, history suggests that recent concentration levels are unlikely to persist. As investors, we look beyond just current market momentum, and instead evaluate companies on an individual basis.

¹ MSCI Research, Aug. 2023.

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Company information is mentioned only for informational purposes and should not be construed as investment or any other advice. The holdings listed should not be considered recommendations to buy or sell a security.

Artificial intelligence (AI) refers to computer systems that can perform tasks typically requiring human intelligence, such as visual perception, speech recognition, decision-making, and language translation.

MSCI World Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets. Investors cannot invest directly in any index.

The technology sector involves special risks, such as the faster rate of change and obsolescence of technological advances and has been among the most volatile sectors of the stock market. A concentration of companies in a narrow sector could cause performance to be more volatile than funds invested in a broader range of industries. Equities are subject to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees. Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries.

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