I saw a guy on Twitter expressing how he created an instance a while ago and didn't notice anything during the recent Mastodon influx. Not a single user joined his instance.
He figured this is due to not being listed properly on some of the onboarding pages. He had tried to get on it, but failed. He then continued to collect some stats on all instances (which is difficult) and came to the conclusion that 90% of Mastodon instances have < 10 users, and most are closed/private.
If true, then yes...users will flock to a small group of large instances. Which makes sense, you want to go to where the most people are, it's the entire point of a social network.
If exponential growth continues (which I doubt), it will lead to existential problems. In costs, moderation, compliance, etc.