Goldman, JPMorgan and Morgan Stanley Pocket $52 Billion of AI Trading Boom

Three banks captured nearly 80% of Wall Street's stock trading revenue this year. Goldman Sachs, JPMorgan Chase and Morgan Stanley made a combined $52 billion through Sept. 30, according to company filings — the dominant share of an industry haul now running at record pace.

The five biggest investment banks generated about $67 billion in equities revenue through the third quarter, Wells Fargo data based on filings show. That is $7 billion more than the group earned in all of 2025, itself a record year.

Artificial intelligence stocks, relaxed capital rules and heavier lending to hedge funds drove the surge. One quarter remains in the year.

Who is winning the AI trading boom?

The Big Three treat each other as their only real rivals, according to Mike Mayo, Wells Fargo banking analyst. "When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that's pretty much it," Mayo told CNBC. "They've been best positioned to take advantage of this market."

The mechanism is prime brokerage — margin loans, securities lending and trading services for hedge funds. The biggest banks lend to the largest funds, which then amplify their bets on AI hardware, hyperscalers and chip suppliers. Demand for that leverage reached new heights, bank executives said on third-quarter calls.

At Goldman Sachs, equities financing jumped 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not disclose the figure separately but reported a similar dynamic.

"I like your 'insatiable demand for capital' point. That feels about right," JPMorgan CFO Jeremy Barnum said on the bank's call. "In this moment where AI is such an overwhelming theme ... there is capital being tapped through all kinds of different mechanisms."

The lending boom has turned equities desks at the Big Three from cyclical, transactional businesses into durable, high-margin lending engines, executives say.

Why can't smaller banks compete?

Executing multibillion-dollar bets — leveraged swaps on volatile AI stocks or sector ETFs — requires an enormous balance sheet. The largest banks can absorb a potential $100 million loss on a single trade without threatening the quarter, trading executives said. Smaller banks cannot underwrite that risk, so they decline the business or cede share. That gap separates the giants from rivals like Bank of America and Citigroup.

European banks, including Credit Suisse, retreated from equities business, and U.S. prime brokers picked up the flow, said Bloomberg Intelligence analyst Herman Chan. "Prime is one of the ultimate scale businesses," Chan said. "If you have a strong equities franchise, the hedge funds will want to transact with you because you have a bigger pool of trading opportunities with counterparties."

Coverage matters as much as price, said Rachid Alaoui, JPMorgan's global head of equities. "For clients, the value isn't just a price on one trade, it's coverage and continuity," Alaoui told CNBC. "You want a dealer that can give you the full suite across products, and you want that service to travel with you across regions. That Matters in stressed markets and periods of volatility."

Where did the growth come from?

Asia was the fastest-growing frontier. Institutional investors poured into South Korea and Taiwan, targeting the memory chipmakers and semiconductor manufacturers behind data center construction — the "picks and shovels" of the AI supply chain, Alaoui said. The Big Three's footprints in Tokyo, Hong Kong, Seoul and Mumbai turned that flow into a goldmine.

Two caveats apply. Transaction taxes and stamp duties inflate Asia prime revenue totals. And banks define equities revenue differently — some include clearing services, others exclude it — which makes apples-to-apples comparisons difficult.

The rally itself began in October 2022, weeks before OpenAI released ChatGPT. "We're still in a stock-based world," Morgan Stanley CEO Ted Pick said on the firm's earnings call. "Equities are still, all things being equal, the attractive asset class."

What are the risks?

The leverage behind the boom has drawn warnings. The International Monetary Fund said this month that growing leverage, crowded positions and correlated selling by hedge funds could create stability risks. The IMF put global hedge fund assets at $13 trillion. In August, JPMorgan CEO Jamie Dimon called industrywide leverage "the highest it's ever been," while stopping short of calling it a market threat.

Regulation moved the other way. Trump administration regulators eased leverage rules for the largest U.S. banks, finalizing the changes in 2025 with adoption allowed as early as January. The revisions stopped treating Treasurys and collateralized prime brokerage loans the same as riskier assets, freeing dealers to expand balance-sheet-heavy businesses.

"Capital did go down, so you have to say the system is somewhat more levered because of the relaxation in regulations," said Darrell Duffie, a Stanford University finance professor and financial stability expert. "It's not a good idea, but it hasn't gotten dramatically out of whack."

Barnum framed hedge fund leverage as a managed risk. "Hedge fund leverage as a contributor of risk to the system is very much in the category of known unknowns," he said. "It doesn't mean it's riskless, but we kind of know what it is."

The industry shrugged off this summer's unwinding of several hedge funds, including Leopold Aschenbrenner's Situational Awareness. Prime brokers moved fast on margin calls. "They deleveraged, risk came down, and the market moved on," Alaoui said.

The CEOs of Goldman Sachs and Morgan Stanley say the AI buildout is still in its early years. If AI proves less transformative than hoped, analysts said, these three banks would take a harder hit than the rest of the industry.