I don't see that. In many of my games, which AI flourish and which don't depends on spawn proximity to other AI or which ones lucked out with Advanced starts. I've seen AI machine empires get chewed up by neighbours, so to say they are dominant is just wrong.
Often xenophobe empires are huge because of their cheaper influence costs.
Personally I don't think Poor Balance is Stellaris biggest problem, because the game is a strategy game. If you find yourself in a situation where you have less power than a neighbour, then you apply some strategy and problem solve.
The Pro Balance crew are, in my opinion, actively sabotaging Stellaris. What does Balance even mean?
It seems to mean every player should have the same power/capabilities at all points of the game, so relative progress remains equivalent.
''What is balance?''
It's REALLY simple and, honestly I fail to understand how people don't get it straight away.
Does one ethic/gov. type/civic
consistently (important word here) outperform others/ underperform by a large margin to the point where if you were trying to win you would always/never pick it? Not balance.
When asking players to tell you how often they use civic X and they go ''Rarely if I'm trying to win, because it's complete garbage, but sometimes I roleplay with it'' Not balance
Examples?
Very good civics: Technocracy, Byzantine Bur., pre 2.2 Mining Guilds, DA, etc.
Very weak civics: Shadow Council, The ones that buff army strength, Feudal Society, Exalted Priesthood, etc.
Solution? Nerf and Buff accordingly. How much? Just go for it. You can adjust again based on feedback. Keep going until they're all fairly good.
At present MEs outperform others because of their growth (all else such as player skill being held constant), so we nerf the growth. Now MEs are no longer the clearly optimal strategy.
What you're aiming for is Civ5's Tradition vs Liberty.
I don't know if you've played Civ5 but the two are basically the equivalent of unity traditions (except it's a bit difficult to get both and you usually choose between them). One encourages you to build a few big cities (tall) while the other to spread out (wide). The first is great if you're going for a science or culture victory, the other is great if you're aiming for a conquest victory.
The important thing to note is that they are equally likely to lead to victory in the hands of a skilled player. If you watch pro Civ5 players give people meta advice they will never suggest one is categorically better, only that each excels at different things.
Now obviously depending on the world set up, domination victory may be a suboptimal approach thereby making tradition suboptimal. But the opposite can also be true, and ultimately neither of the two is the clearly better option given the average map type. In other words, they are
balanced.
There are two reasons this is important:
1) In singleplayer a lot of players wish to use x civic for thematic purposes, but knowing it is suboptimal detracts from the enjoyment somewhat
2) In Multi where players ultimately derive enjoyment from competition and victory, the diversity of the game is greatly diminished as one would never pick a civic like idealistic foundation instead of say Meritocracy, if they were trying to win. Likewise, all empires being allowed, one would be handicapping themselves if they went as a Hive, or if they didn't use robots even as spiritualist (because it is always better and that's the problem)
Don't get me wrong, I love robots more than the average guy (might even major in that field) but at a certain point after building a robot plant on the nth planet, because it's categorically better in all cases to do so and I WANT TO TRASH my best friend at multi again, I just think to myself ''I wish this wasn't the only viable strategy, because I'm getting sick of looking at droid pops all the time. I'm supposed to be purging them thematically speaking, but I'm not gonna nuke myself in the foot, sooo ...''