Goldman Sachs, JPMorgan, Morgan Stanley Dominating AI Stock Boom: Their Edge

Fueled by the global boom in artificial intelligence (AI) stocks, big Wall Street banks have had a banner year for equities trading. Goldman Sachs, JPMorgan Chase, and Morgan Stanley, collectively known as the Big Three, have dominated the market, accounting for nearly 80% of the total $67 billion in equities revenue generated by the top five investment banks through September 30, according to company filings.

The surge in trading activity is driven by the insatiable demand for capital in the AI sector. “When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that’s pretty much it,” said Mike Mayo, a banking analyst at Wells Fargo, to CNBC.

The performance of the Big Three is particularly noteworthy. Goldman Sachs, JPMorgan Chase, and Morgan Stanley have collectively raked in $52 billion in stock trading revenue so far this year. This figure is nearly 80% of the total revenue, highlighting the significant edge these banks have over their rivals.

Prime brokerage, the business of providing hedge funds with margin loans, securities lending, and other trading services, has become a key battleground. The Big Three’s prime brokers serve the largest funds across markets and products, making them central to the equities story. Goldman Sachs reported a 96% jump in equities financing activities to a record $3.37 billion in the third quarter. JPMorgan and Morgan Stanley saw similar trends, according to their filings.

The increasing demand for leverage to make bets on AI hardware, hyperscalers, and chip suppliers is driving this activity. “In this moment where AI is such an overwhelming theme, there is capital being tapped through all kinds of different mechanisms,” said JPMorgan CFO Jeremy Barnum during the bank’s third quarter conference call.

This demand has transformed equity desks at the Big Three into more durable, high margin lending engines. For clients, the value isn’t just a price on one trade, but also coverage and continuity. “You want a dealer that can give you the full suite across products, and you want that service to travel with you across regions,” said Rachid Alaoui, JPMorgan’s global head of equities.

The performance gap between the Big Three and their rivals, such as Bank of America and Citigroup, highlights a widening divide in capital markets. The biggest banks can absorb potential $100 million losses without threatening their quarters, while smaller or more niche banks can’t underwrite single trade risks of that magnitude, forcing them to decline the business or cede share.

U.S. prime brokers have also benefited from the retreat of European banks, like Credit Suisse, from the equities business. Herman Chan, an analyst at Bloomberg Intelligence, said, “Prime is one of the ultimate scale businesses. 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.”

Institutional investors have poured into South Korea and Taiwan, targeting the “picks and shovels” of the AI supply chain, according to JPMorgan’s Rachid Alaoui. For the Big Three, with their footprints across Tokyo, Hong Kong, Seoul, and Mumbai, the Asia trade was a goldmine. However, transaction taxes and stamp duties are included in top line revenue, artificially inflating Asia prime totals.

While the CEOs of Goldman Sachs and Morgan Stanley have said the AI build out is still in its early years, a downturn could impact these banks more than others if AI turns out to be not as transformative as hoped. Analysts noted that the boom has drawn some concern over the potential risks posed by hedge funds. The International Monetary Fund warned that growing leverage, crowded positions, and correlated selling from hedge funds could create potential stability risks. The IMF estimated that global hedge fund assets had reached $13 trillion.

In August, JPMorgan CEO Jamie Dimon said industrywide leverage was the highest it had ever been, though he stopped short of calling the risk big enough to pose a threat to the financial markets. Despite the concerns, prime brokers have learned to leap on margin calls and quickly take down risk when markets move against clients.

Another factor driving the equities boom is the easing of leverage rules for the largest U.S. banks by Trump administration regulators. The revised rules, finalized in 2025, allowed banks to adopt them as early as January, giving them more room to expand balance sheet heavy businesses including prime brokerage.

While the larger size of the market and higher volatility can create more trading, derivatives activity, and leverage, Wall Street executives and analysts pointed out that they use collateral and frequent stress testing to get ahead of problems. “Hedge fund leverage as a contributor of risk to the system is very much in the category of known unknowns,” said JPMorgan’s Barnum.

The overall momentum of the business is bolstered by a stock rally that 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.”

While the AI build out is still in its early years, the Big Three are well positioned to capitalize on the opportunities it presents.

Source: https://www.cnbc.com/2026/10/21/goldman-sachs-jpmorgan-morgan-stanley-ai-trading.html