Goldman Sachs, JPMorgan, Morgan Stanley dominate AI stock boom

Key Points:

• Wall Street's five biggest investment banks have generated approximately $67 billion in equities revenue through September 30, surpassing the record set in 2025 by $7 billion, driven largely by AI stock trading and increased lending to hedge funds.
• Goldman Sachs, JPMorgan Chase, and Morgan Stanley—the "Big Three"—account for nearly 80% of this revenue, benefiting from their strong prime brokerage services that provide hedge funds with margin loans and securities lending.
• The surge in AI-related trading and demand for leverage has transformed equity desks at these banks into high-margin lending operations, with significant growth in equities financing activities, such as a 96% jump at Goldman Sachs in Q3.
• The equities boom is also supported by eased regulatory capital rules allowing banks more flexibility in balance sheet use, though concerns remain about the risks posed by high hedge fund leverage and potential market volatility.
• Despite some hedge fund failures this summer, prime brokers have effectively managed risks through margin calls and stress testing, and the overall momentum in equities trading is expected to continue amid ongoing AI-driven market interest.