We propose a dynamic theory of financial market concentration in settings where some investors trade strategically because of price impact. The distribution of risk and wealth determines market power, and wealth evolves over time given strategic portfolio choices. In equilibrium, the most well-capitalized investors remain under-diversified to capture rents, generating concentration and volatility in the wealth distribution. Conversely, wealth concentration leads to inflated asset prices, unequal returns to wealth, and poor liquidity that further exacerbates the distortions from market power. We discuss applications of our framework, and derive implications for evaluating welfare using asset pricing data.