Goldman Sachs, JPMorgan and Morgan Stanley are dominating the AI stock boom. Here's their edge
Wall Street’s Big Three have generated $52 billion in equity trading revenue this year, capturing about 80% of the market on rising margin lending to hedge funds.
TL;DR
- Big Wall Street banks have generated about $67 billion in equities revenue through September 30, exceeding the full 2025 record.
- Goldman Sachs, JPMorgan Chase, and Morgan Stanley account for nearly 80% of this revenue, totaling $52 billion.
- Increased lending to hedge funds, known as prime brokerage, is a key driver, facilitating amplified bets on AI stocks.
- Demand for leverage in AI hardware, hyperscalers, and chip suppliers has reached new heights.
- Equities financing activities at Goldman Sachs jumped 96% in the third quarter.
- The Big Three's large balance sheets allow them to absorb significant potential losses from large trades, unlike smaller banks.
- U.S. prime brokers benefit from European banks' retreat from the equities business.
- Institutional investors are pouring into Asia, targeting AI supply chain companies.
- The AI buildout is still considered in its early years, with potential risks if AI is not as transformative as hoped.
- Concerns exist regarding potential stability risks from growing hedge fund leverage, with global hedge fund assets reaching $13 trillion.
- Relaxed capital rules under the Trump administration have given banks more room to expand balance-sheet-heavy businesses like prime brokerage.