There’s a raging, secular bull market in analysis of US corporate dominance.

Just when you thought you’d seen every conceivable illustration of market concentration — catalogued every statistic attesting to the monopoly power, both figurative and literal, of America’s largest companies — some new, or if not new, refreshed, exemplification of the dynamic grabs a headline or shows up in an analyst note.

Most recently, this discussion centers around the idea that binge borrowing among so-called hyper-scalers keen to secure sufficient compute to stay competitive in the AI arms race marks a tectonic shift in the investment grade credit universe, which will by and by be dominated by mega-cap US “tech” just like cap-weighted equity benchmarks. I wrote about that in “Corporate Bond Market Faces Sea Change In Hyper-Scaler Debt Spree.”

In case you haven’t had your fill when it comes to this sort of analysis (and I’ve found reader appetite to be insatiable), I ran across some new charts and fresh color that’s well worth a mention. As usual, I’ll bury the lede.

The figures below are from SocGen’s Vincent Cassot and Jitesh Kumar, who wrote that although the “dominance of the AI theme and the technology sector in US equities is well known, their impact on equity index volatility” is perhaps under-appreciated, despite being “significant.”

As you can see, “significant” is an understatement. When you include Comms Services, “tech” is responsible for as much as three quarters of index volatility in the 2020s. “The top 10 names in the index alone account for around half!” Cassot and Kumar exclaimed.

So, as heavily weighted as “tech” is, and as dominant as the top 10 stocks are, they’re even more so when measured by their contribution to volatility.

Now to the really incredible stats. The figure on the left, below, from the same SocGen note, shows the inverse of the Herfindahl-Hirschman Index (or HHI) for the top 50 names in the S&P, plotted with the same metric for the largest-cap European stocks. The chart header uses the term “effective number of firms” (or ENC). That’s the quasi-colloquial nomenclature for the reciprocal of the HHI.

In simple terms: The precipitous, post-pandemic drop for the red line in the figure on the left suggests a dramatic decline in competitiveness. The lower that number, the more concentrated the market, and the higher the potential for monopolistic (or, at best, oligopolistic) behavior.

Both in absolute terms and relative to Europe, the US is extraordinarily inegalitarian. Given that the firms driving the abrupt deterioration in the ENC proxy for competition are engaged in the development of a technology which many argue will define the future of our species (to the point, doomsayers suggest, that our species may not have a future), that deterioration’s terrifying.

Cassot and Kumar didn’t go there; they stuck to the market implications. Editorializing around the chart on the right, which inverts the ENC and plots it alongside average single-stock vol, they noted that if the pre-pandemic correlation held, these levels of concentration would be associated with an “unprecedented level of volatility.”