Goldman, JPMorgan, and Morgan Stanley capture 80% of AI equity trading

The three largest U.S. investment banks captured nearly 80% of the industry's equities trading revenue this year, driven by a surge in artificial intelligence-related activity. Goldman Sachs, JPMorgan Chase, and Morgan Stanley generated a combined $52 billion in stock trading revenue through September 30, according to company filings. This figure represents the vast majority of the approximately $67 billion generated by the five biggest investment banks during the same period. The five-bank total is $7 billion higher than the record haul recorded for all of 2025. Mike Mayo, a banking analyst at Wells Fargo, stated that these three institutions view each other as their primary competitors in the AI trade and are best positioned to exploit the current market conditions.

Prime brokerage has emerged as a central growth driver for these firms, facilitating margin loans and securities lending for hedge funds seeking to amplify their positions. Demand for leverage to fund bets on AI hardware, hyperscalers, and chip suppliers has reached new heights, bank executives reported last week. At Goldman Sachs, equities financing activities increased by 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley did not disclose specific financing figures but indicated they observed a similar dynamic. Jeremy Barnum, JPMorgan's CFO, described the situation on the bank's third-quarter conference call as one where capital is being tapped through various mechanisms due to the overwhelming theme of AI.

The performance gap between these giants and rivals such as Bank of America and Citigroup highlights a widening divide in capital markets. Rachid Alaoui, JPMorgan's global head of equities, told CNBC that clients value coverage and continuity over single-trade prices, preferring dealers who offer a full suite of products across regions. Executing multibillion-dollar bets, such as leveraged swaps on volatile AI stocks, requires an enormous balance sheet. The largest banks can absorb potential $100 million losses without threatening their quarterly results, according to trading executives. Smaller or more niche banks often cannot underwrite single-trade risks of that magnitude, forcing them to decline such business or cede market share. Herman Chan, a Bloomberg Intelligence analyst, noted that U.S. prime brokers have also benefited from the retreat of European banks like Credit Suisse from the equities business, emphasizing that prime brokerage is an ultimate scale business where larger pools of trading opportunities attract hedge funds.

Asia has become the fastest-growing frontier for equities trading this year. Institutional investors targeted memory chipmakers and semiconductor manufacturers in South Korea and Taiwan that support data center construction, Alaoui said. For the Big Three, with footprints in Tokyo, Hong Kong, Seoul, and Mumbai, this trade was significant. However, trading executives noted that transaction taxes and stamp duties included in top-line revenue can artificially inflate Asia prime totals. Additionally, there is no agreed-upon definition of equities trading revenue, with some banks including clearing services while others exclude them, making direct comparisons difficult.

The momentum in the business is boosted by a stock rally that began in October 2022, weeks before OpenAI released ChatGPT. Ted Pick, Morgan Stanley's CEO, stated on the firm's earnings call that equities remain the attractive asset class. While Goldman Sachs and Morgan Stanley CEOs have said the AI buildout is in its early years, analysts warn that if AI proves less impactful than anticipated, a downturn could impact these banks more severely than others.

Concerns over risk have emerged from regulatory bodies and industry leaders. The International Monetary Fund warned this month that growing leverage and crowded positions among hedge funds could create stability risks. The IMF estimated global hedge fund assets reached $13 trillion. In August, JPMorgan CEO Jamie Dimon said industrywide leverage was at its highest level ever, though he did not characterize it as an immediate threat to financial markets. Wall Street executives noted that the industry was not fazed by the summer meltdown of several hedge funds, including Situational Awareness run by former OpenAI researcher Leopold Aschenbrenner. Alaoui said prime brokers are prepared to act quickly on margin calls to reduce risk when markets move against clients.

Regulatory changes have also contributed to the boom. Trump administration regulators eased leverage rules for the largest U.S. banks in 2025, allowing them to adopt revised standards as early as January. These changes removed stringent balance-sheet caps that previously treated Treasurys and collateralized prime brokerage loans similarly to riskier assets. Darrell Duffie, a finance professor at Stanford University, said this relaxation makes the system somewhat more levered but has not gotten dramatically out of whack. He noted that while larger market size and higher volatility create more activity, this is not inherently alarming. JPMorgan's Barnum described hedge fund leverage as a known unknown, stating that while it is not riskless, the nature of the risk is understood.