Goldman Sachs, JPMorgan and Morgan Stanley dominate the AI ​​stock boom

Fueled by the global boom in AI-driven stocks, loosening capital rules and increased lending to hedge funds, Wall Street’s big banks have already had a record year in stock trading, even with a quarter to go.

The five largest investment banks generated about $67 billion in stock market revenue as of Sept. 30, according to company filings. That’s $7 billion more than the group earned in the year 2025, which was a record in itself.

But it’s Wall Street’s big three who have captured the largest share of what promises to be the industry’s most lucrative arena: Goldman Sachs, JPMorgan Chase And Morgan Stanley have made a total of $52 billion in stock trading revenue so far this year, almost 80% of the total.

“When it comes to the AI ​​mega-business, the big three see themselves as their main competitors, and that’s about it,” Mike Mayo, a banking analyst at Wells Fargo, told CNBC. “They are best positioned to take advantage of this market.”

Wall Street banks are enjoying an epic run of blockbuster profits as the total value of stock markets explodes and trading activity from institutional and retail investors increases in stocks, exchange-traded funds and derivatives. Helping to boost this activity are the loans that banks, through their brokerage houses, give to hedge funds so they can amplify their bets.

Prime brokerage – the business of providing margin lending, securities lending and other trading services to hedge funds – has become a key battleground and source of growth. The Big Three’s leading brokers play a central role in the overall stock story, as they serve the largest funds across all markets and products.

Demand for leverage to bet on AI hardware, hyperscalers and chip suppliers has reached new heights, bank executives said last week.

At Goldman Sachs, equity financing activity jumped 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not present this figure, but said they saw similar dynamics.

“I like your point about the ‘insatiable demand for capital.’ That sounds exactly right,” Jeremy Barnum, JPMorgan’s chief financial officer, said on the bank’s third-quarter conference call, responding to analysts’ questions about funding demands.

“At a time when AI is such a predominant theme… capital is being leveraged through all kinds of different mechanisms,” Barnum said.

That demand has helped transform the Big Three’s equity desks from cyclical, transactional businesses to more sustainable, high-margin lending engines, Wall Street executives say.

The performance gap between Wall Street giants and their rivals, including Bank of America And Citi Group highlights a growing divide in capital markets.

“For clients, value is not just the price of a transaction, it’s the coverage and the continuity,” Rachid Alaoui, JPMorgan’s global head of equities, told CNBC in an interview. “You want a dealership that can offer you a full line of products, and you want that service to support you in all regions. This is important in tight markets and periods of volatility.

Executing multibillion-dollar bets, like leveraged swaps on volatile AI stocks or sector ETFs, can require a huge balance sheet. The biggest banks can absorb potential losses of $100 million without threatening their quarters, trade executives say. Smaller or more specialized banks cannot guarantee risks associated with a single transaction of this magnitude, forcing them to decline their activities or sell shares.

U.S. prime brokers also benefited from the withdrawal of European banks, including Credit Suisse, from the equity sector, said Herman Chan, an analyst at Bloomberg Intelligence.

“Prime is one of the most important companies,” Chan said. “If you have a strong equity franchise, hedge funds will want to trade with you because you have more trading opportunities with counterparties.”

While U.S. markets have been swept aside this year by software and cloud computing giants, trade executives say the fastest-growing frontier for stocks is in Asia.

Institutional investors have flocked to South Korea and Taiwan, targeting the “picks and shovels” of the AI ​​supply chain: memory chip and semiconductor makers supporting the construction of data centers, Alaoui said.

For the Big Three, with their footprints across Tokyo; Hong Kong; Seoul, South Korea; and Mumbai, India; Asian trade was a gold mine. However, trade officials point out that transaction taxes and stamp duties are included in the turnover, artificially inflating Asia’s base totals.

There is also no agreed definition of what stock trading revenue should include, so some banks include lines of business such as clearing services that others exclude from their stock trading totals, making comparisons difficult.

But this does not change the overall dynamics of the company, stimulated by a stock market rally that began in October 2022, a few weeks before the publication of ChatGPT by OpenAI.

“We’re still in an equity-based world,” Morgan Stanley CEO Ted Pick said during the company’s earnings conference call. “Equities remain, all things being equal, the attractive asset class.”

While the CEOs of Goldman Sachs and Morgan Stanley have said AI development is still in its early stages, if AI turns out not to be as transformative as hoped, a slowdown could have a bigger impact on those banks than others, analysts said.

This boom has also sparked some concerns about the possible risks posed by hedge funds.

The International Monetary Fund warned this month that growing debt, saturated positions and correlated selling by hedge funds could create potential stability risks. The IMF estimates that global hedge fund assets have reached $13 trillion.

In August, JPMorgan CEO Jamie Dimon said industry-wide leverage was “the highest it’s ever been,” but stopped short of calling the risk significant enough to pose a threat to financial markets.

Wall Street executives and analysts stressed that the sector was not deterred by the collapse of several hedge funds this summer. While the hedge fund run by former OpenAI researcher Leopold Aschenbrenner, Situational Awareness, has made headlines, several smaller companies have also experienced forced liquidation.

Prime brokers have learned to respond to margin calls and quickly reduce risk when markets move against their clients, JPMorgan’s Alaoui said.

“Over the summer, some investors had positions that they were forced to unwind,” he told CNBC. “They deleveraged, the risk went down and the market moved on.”

Another factor driving the stock boom: Trump administration regulators relaxed some leverage rules for America’s biggest banks, giving them more room to expand into balance-sheet-heavy businesses, including prime brokerage. The revised rules were finalized in 2025 and banks were allowed to adopt them as early as January.

By relaxing strict balance sheet caps that previously treated Treasury bonds and prime brokerage loans, which are collateralized, the same as riskier assets, regulators gave brokers greater flexibility to deploy balance sheet capital.

“Capital has actually declined, so it’s fair to say that the system is a little more leveraged because of the easing of regulations,” said Darrell Duffie, a finance professor at Stanford University and a leading expert on financial stability. “It’s not a good idea, but it hasn’t really gone off the rails.”

The larger market size and higher volatility can create more trading, derivatives activity and leverage, he said, but that in itself is not alarming.

Wall Street executives also downplayed concerns about debt, emphasizing that they use collateral and frequent stress tests to get ahead of problems.

“Hedge fund leverage as a risk factor for the system falls into the category of known unknowns,” JPMorgan’s Barnum said last week. “That doesn’t mean it’s risk-free, but we kind of know what it is.”

—CNBC Leslie Picker And Ritika Shah contributed to this report.