New data from the Nasdaq Economic Institute points to a surge in one-person business formation that has accelerated since early 2025, with the rise concentrated in sectors that adopt artificial intelligence more heavily. The institute’s inaugural report in an AI research series links the uptick to the spread of more capable generative and agentic AI tools, arguing that lower barriers to launching small businesses are reshaping early-stage entrepreneurship and, over time, the pipeline toward public markets.
According to the report, overall business applications have been climbing, but the acceleration is largely coming from “all other” categories—such as sole proprietors and single-member entities—rather than the “high propensity” bucket of formations more likely to hire employees. The institute said the pattern aligns with a timeline that includes growing familiarity with generative AI platforms and improvements in AI tooling quality.
Key takeaways
- Business formation rose more than 20% for one-person operations since early 2025, according to Nasdaq Economic Institute research.
- Catalyst: the report attributes the acceleration to advances and wider access to agentic AI and generative AI tools, which reduce start-up costs for independent entrepreneurs.
- Implication: new company creation is increasingly concentrated in high AI-adoption sectors that have historically been among the most productive industries.
- What’s less clear: the institute notes other policy and tax reporting effects helped drive retail-related formations earlier, but says the growing share tied to high AI-adoption sectors strengthens its AI-led explanation.
What the Nasdaq report finds
The Nasdaq Economic Institute report, “AI is Enabling More Entrepreneurship,” is the first release in a series examining how AI is affecting the economy and markets, beginning with business formation. The institute framed entrepreneurship as the initial step in a company’s path to accessing capital markets, including potential routes to becoming public.
Data highlighted by the institute shows that since early 2025, overall business formation has increased, but the “high propensity” category—formations most likely to hire employees—has remained essentially flat. Instead, nearly all of the acceleration has come from the broader “all other” group, which includes sole proprietors and independent contractors.
Within that “all other” segment, the report said one-person business formation is up more than 20% since early 2025. It also found that when the formation data is mapped to AI adoption rates by sector, about half of new formations are now coming from high AI-adoption sectors, including areas such as technology, finance, and professional services.
Why the timing lines up with AI adoption
The institute pointed to a combination of technological and practical factors that became more prominent in the period leading into the early-2025 rise. According to the report, the timing aligns with the arrival of agentic AI tools and a step change in the quality of generative AI, along with a couple of years of growing familiarity following the launch of early gen AI platforms.
The report argues that these tools have lowered barriers to entry for entrepreneurs. It cited the affordability of AI subscriptions as a key mechanism, saying a solo consultant can now replicate—or potentially surpass—the output of a small team, reducing the need to hire at the earliest stages.
Rather than framing the shift as simply an automation story inside large firms, Nasdaq’s analysis emphasizes the early-stage entrepreneurial component: more individuals can act on ideas without first assembling an office, payroll, or support staff.
Sector productivity context and potential economic effects
Beyond the formation numbers, the institute linked the new company activity to long-run productivity patterns. According to the report, high AI-adoption sectors have been the highest-productivity industries over the last two decades, with annual productivity growth of 2.2% on average—compounding to about 56% over the period. The institute contrasted this with medium AI-adoption sectors at 1.6% annual growth (compounding to about 39%) and said low-adoption sectors posted negative 0.1% annual growth.
Data-driven investment relevance comes from the institute’s implication that if new businesses are increasingly forming in those high AI-adoption sectors, the economy could see a measurable effect over time. Nasdaq said much of the mainstream discussion on AI and productivity has centered on workflow changes at large companies, while startup formation may be underappreciated as an additional channel for output gains.
The institute also suggested that startups and micro-businesses could represent a larger-than-noticed pool of future companies that eventually require external capital. In that view, AI-enabled entrepreneurship may broaden the pipeline that could lead to larger funding rounds and, later, capital market listings.
Separating AI from policy and other explanations
Nasdaq Economic Institute said its confidence rests partly on how stable business formation data typically behaves over time. It described a gentle upward trend into the COVID period, followed by a level shift and then a period that was largely sideways until early last year, when business formation began trending higher again.
The institute said it investigated whether policy changes that affect reporting requirements could explain the shift, pointing to retail as a notable case. It reported that much of the growth in the medium AI-adoption bucket came from retail and tied this to the American Rescue Plan Act’s dramatic lowering of IRS reporting requirements for sellers on platforms such as eBay. The institute said those effects were later reversed by the One Big Beautiful Bill Act, with the retail-driven impact now starting to fade.
In contrast, the report said the share of new formations coming from high AI-adoption sectors has been increasing over time, which it offered as evidence supporting an AI-driven interpretation rather than a policy-only explanation.
What to watch next
Nasdaq Economic Institute said its broader research agenda includes capital formation, market modernization, and financial resiliency, and that the AI research series will continue to assess how AI is influencing the economy and financial markets. Investors may want to watch for future work that connects entrepreneurship and early-stage formation data to downstream measures such as funding activity, job creation patterns, and the pace at which companies progress toward external capital and market access.
