Big Three Wall Street Banks Dominate AI Stock Trading, Generating $52 B in Revenue

David Solomon, CEO of Goldman Sachs (L), Jamie Dimon, CEO of JP Morgan (C), and Ted Pick, CEO of Morgan Stanley.

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A surge in AI‑related equities, looser capital rules and expanded lending to hedge funds have propelled Wall Street’s big banks to a record year for equities trading, even before the final quarter.

The five largest investment banks generated about $67 billion in equities revenue through September, exceeding the previous annual high by $7 billion.

The Big Three—Goldman Sachs, JPMorgan Chase and Morgan Stanley—have captured roughly $52 billion in stock‑trading revenue this year, representing close to 80 % of the total.

“In the AI mega‑trade arena, the three largest banks view each other as primary rivals, according to Wells Fargo analyst Mike Mayo. “They are best placed to capitalize on this market,” he told CNBC.

Wall Street is enjoying a robust profit surge as the overall equity market expands and trading activity from both institutional and retail investors rises across stocks, ETFs and derivatives. A key driver is the increased lending that the banks extend to hedge funds through their prime‑brokerage services, allowing the funds to amplify their positions.

Prime brokerage—the service that supplies hedge funds with margin loans, securities lending and other trading tools—has become a critical growth area. The Big Three’s prime‑brokerage units sit at the core of this equities rally because they serve the largest funds across markets and asset classes.

Executives note that demand for leverage to bet on AI hardware, hyperscalers and chip suppliers has reached unprecedented levels.

At Goldman Sachs, equities financing activities jumped 96 % in the third quarter, reaching a record $3.37 billion. JPMorgan and Morgan Stanley did not disclose a comparable figure, but they reported similar trends.

“I agree with your point about ‘insatiable demand for capital’; the sentiment feels accurate,” Jeremy Barnum, JPMorgan’s CFO, told analysts during the bank’s third‑quarter earnings call.

“In this moment where AI is such an overwhelming theme … there is capital being tapped through all kinds of different mechanisms,” Barnum added.

That demand has transformed the equity desks of the Big Three from cyclical, transaction‑driven operations into more durable, high‑margin lending engines, according to Wall Street executives.

The disparity between the dominant banks and rivals such as Bank of America and Citigroup underscores a widening divide in capital‑markets earnings.

“For clients, the value isn’t just a price on a single trade; it’s coverage and continuity. You want a dealer that can provide a full suite of products that travels with you across regions, especially during stressful or volatile markets,” said Rachid Alaoui, JPMorgan’s global head of equities, in an interview with CNBC.

Executing multi‑billion‑dollar bets—such as leveraged swaps on volatile AI stocks or sector ETFs—requires an enormous balance sheet. The largest banks can absorb potential losses of around $100 million without jeopardizing quarterly results, trading executives say. Smaller or niche banks lack the capacity to underwrite such risks, forcing them to decline or surrender market share.

U.S. prime brokers have also benefited from the exit of European banks like Credit Suisse from the equities business, according to Bloomberg Intelligence analyst Herman Chan.

“Prime brokerage is an ultimate scale business,” Chan observed. “A strong equities franchise attracts hedge funds because it offers a deeper pool of trading opportunities and counterparties.”

Picks and shovels

While the U.S. market has been dominated by software and cloud‑computing names this year, trading executives say the fastest‑growing equity frontier is in Asia.

Institutional investors have flooded into South Korea and Taiwan, targeting the “picks and shovels” of the AI supply chain—the memory chipmakers and semiconductor producers that support data‑center expansion,” Alaoui noted.

With offices in Tokyo, Hong Kong, Seoul and Mumbai, the Big Three have reaped significant gains from Asian trade. However, executives point out that transaction taxes and stamp duties are counted in top‑line revenue, artificially inflating Asia’s prime‑brokerage totals.

There is no uniform definition of equities‑trading revenue; some banks include clearing services while others exclude them, complicating direct comparisons.

Nonetheless, the business remains on an upward trajectory, buoyed by a market rally that began in October 2022, well before ChatGPT’s launch.

“We remain in a stock‑centric world. Equities are still, all else equal, the most attractive asset class,” Morgan Stanley CEO Ted Pick said on the firm’s earnings call.

Although Goldman Sachs and Morgan Stanley CEOs describe the AI build‑out as still early, analysts caution that if AI fails to deliver the expected transformation, the banks could be disproportionately affected.

The surge has also raised concerns about hedge‑fund risk. The IMF warned this month that rising leverage, crowded positions and correlated selling by hedge funds could threaten financial stability, estimating global hedge‑fund assets at $13 trillion.

JPMorgan CEO Jamie Dimon said in August that industry‑wide leverage was “the highest it’s ever been,” though he stopped short of declaring it a systemic threat. Wall Street executives note that the sector shrugged off the collapse of several hedge funds over the summer.

While the high‑profile failure of Leopold Aschenbrenner’s fund Situational Awareness grabbed headlines, several smaller firms also faced forced unwindings.

Prime brokers have become adept at responding to margin calls and quickly reducing exposure when markets move against clients, said JPMorgan’s Alaoui. “In the summer, some investors were forced to unwind positions. They deleveraged, risk fell, and the market moved on,” he explained to CNBC.

‘Known unknowns’

Another catalyst for the equities boom is the regulatory environment. Under the Trump administration, regulators have relaxed leverage rules for the largest U.S. banks, giving them more capacity to expand balance‑sheet‑intensive businesses such as prime brokerage. The revised rules, finalized in 2025, became effective for banks as early as January.

By loosening the previous caps that treated Treasury securities and collateralised prime‑brokerage loans the same as riskier assets, regulators have granted dealers greater flexibility to allocate balance‑sheet capital.

“Capital did go down, so you have to say the system is somewhat more levered because of the relaxation in regulations,” said Darrell Duffie, a finance professor at Stanford University. “It’s not a good idea, but it hasn’t gotten dramatically out of whack.”

The larger market size and heightened volatility can generate more trading, derivatives activity and leverage, he observed, but that is not inherently alarming.

Wall Street executives also played down leverage concerns, emphasizing the use of collateral and frequent stress testing to stay ahead of potential problems.

“Hedge‑fund leverage as a contributor of risk to the system is very much in the category of known unknowns,” Barnum said. “It doesn’t mean it’s riskless, but we kind of know what it is.”

— CNBC’s Leslie Picker and Ritika Shah contributed to this report.

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