Wall Street’s Big Three Lead the AI-Driven Stock Trading Boom

Highlights

Artificial intelligence trading and rising demand for hedge-fund financing have helped Wall Street’s biggest banks post record equity revenues. Goldman Sachs, JPMorgan Chase and Morgan Stanley generated a combined $52 billion in stock trading revenue so far this year, nearly 80% of the five largest investment banks’ total. Their prime brokerage operations, large balance sheets and global reach give them an advantage in financing complex trades and serving major funds. Asian markets have also contributed to activity, while differences in reporting make comparisons difficult. The boom is profitable, but increasing leverage and crowded positions have prompted financial-stability concerns.

Sentiment Analysis

• The article’s tone is mixed, with a strong emphasis on the commercial success of the three leading banks. Record trading revenues, heightened demand for financing and global client coverage are presented as factors supporting continued growth.


• Its positive assessment is qualified by structural and market risks. The banks’ expanding prime brokerage businesses depend on hedge funds’ appetite for leveraged positions, including trades linked to AI companies and suppliers. A reversal in AI-related stocks could therefore expose firms to losses or reduce trading activity.


• The discussion of leverage is cautious rather than alarmist. The IMF warned about stability risks from growing leverage and crowded positions, while JPMorgan’s Jamie Dimon described industry leverage as “the highest it's ever been.” Executives also cited collateral, stress testing and rapid responses to margin calls as safeguards.


• Overall, the article portrays a lucrative but increasingly interconnected market. Its sentiment is mixed, leaning positive on current business performance while acknowledging meaningful downside risks.

Article Text

Wall Street’s largest investment banks have reported a powerful year for equities trading, supported by the surge in interest in artificial intelligence stocks, more lending to hedge funds and changes to U.S. bank capital rules. Through Sept. 30, the five biggest investment banks recorded about $67 billion in equities revenue, $7 billion more than they earned during all of 2025, which had itself been a record year. One quarter remained in the year covered by the report.

Three firms captured most of that activity. Goldman Sachs, JPMorgan Chase and Morgan Stanley together generated $52 billion in stock trading revenue so far this year, nearly 80% of the five-bank total. Wells Fargo banking analyst Mike Mayo said the three regarded one another as their main competitors in the AI-related trading boom and were particularly well positioned to benefit from market conditions.

The wider rise in stock-market values and trading by institutional and individual investors has increased activity across stocks, exchange-traded funds and derivatives. Banks have also expanded lending through prime brokerage divisions. These businesses provide hedge funds with margin loans, securities lending and other trading services, allowing clients to use leverage to increase the size of their market positions.

Prime brokerage has become an important source of growth and a competitive arena for the largest firms. The Big Three serve major funds across multiple markets and products, and their broad operations can support trades that require substantial financing. Executives said demand for leverage tied to AI hardware, hyperscalers and chip suppliers had reached new heights.

At Goldman Sachs, equities financing activities rose 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not disclose an equivalent figure, but reported similar demand. JPMorgan Chief Financial Officer Jeremy Barnum described the need for capital as “insatiable,” saying that the AI theme was drawing funding through a range of mechanisms. Executives say financing has helped turn equity desks into more durable, high-margin lending businesses rather than operations focused only on individual transactions.

Scale is central to the banks’ advantage. Large, leveraged trades—including swaps linked to volatile AI shares or sector ETFs—can expose a dealer to significant potential losses. Trading executives said the biggest banks can absorb potential $100 million losses without putting their quarterly results at risk. Smaller or more specialized firms may not be able to take on single-trade exposures of that size, leaving them to decline business or lose market share.

U.S. prime brokers have also benefited from the retreat of European lenders, including Credit Suisse, from equities. Bloomberg Intelligence analyst Herman Chan called prime brokerage a scale business, noting that hedge funds may value access to a larger pool of trading opportunities and counterparties. JPMorgan’s global head of equities, Rachid Alaoui, said clients also seek broad product coverage and consistent service across regions, particularly during volatility.

Although U.S. investors focused on software and cloud-computing companies, trading executives identified Asia as a fast-growing area for equities. Institutional investors invested in South Korea and Taiwan, targeting companies supplying memory chips and semiconductors for data-center construction. The Big Three’s presence in Tokyo, Hong Kong, Seoul, South Korea, and Mumbai, India, helped them participate. However, transaction taxes and stamp duties are included in top-line revenue in some Asian markets, which can inflate prime brokerage totals.

Revenue comparisons are also complicated by differences in how banks define equities trading. Some include clearing services in their totals, while others exclude them. Despite those reporting variations, the firms describe a broader rise in activity that has accompanied the stock rally beginning in October 2022, weeks before OpenAI released ChatGPT. Morgan Stanley Chief Executive Ted Pick said equities remained an attractive asset class.

The expansion brings risks as well as income. The International Monetary Fund warned that growing leverage, crowded positions and correlated selling by hedge funds could create financial-stability risks. It estimated global hedge fund assets at $13 trillion. In August, JPMorgan Chief Executive Jamie Dimon said industrywide leverage was “the highest it's ever been,” though he did not say it posed a threat to financial markets. Several hedge funds experienced forced unwinding during the summer, including Situational Awareness, run by former OpenAI researcher Leopold Aschenbrenner.

Prime brokers say they respond to market pressure by issuing margin calls and reducing risk when clients’ positions move against them. Alaoui said some investors were forced to unwind positions during the summer, after which leverage and risk declined and markets continued. Barnum characterized hedge-fund leverage as a “known unknown”: not risk-free, but a risk banks believe they can monitor.

Regulatory changes have provided another source of support. Rules finalized in 2025 allowed banks to adopt revised requirements as early as January. The changes eased balance-sheet constraints that had treated U.S. Treasurys and collateralized prime brokerage loans similarly to riskier assets, giving dealers more flexibility to use capital for these businesses. Stanford finance professor Darrell Duffie said the regulatory relaxation reduced capital requirements and made the system somewhat more leveraged, though he said it had not become dramatically out of balance. The central question for the banks is whether strong activity can continue if AI-related valuations or investor demand weaken.

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