Wall Street’s Big Three Drive Record Equities Trading Revenue Amid AI Boom
- Major Wall Street banks have earned approximately $67 billion in equities revenue through September 30, 2026.
- Goldman Sachs, JPMorgan Chase, and Morgan Stanley account for nearly 80% of this total, generating $52 billion in stock trading revenue.
- Relaxed capital rules and increased hedge fund lending have contributed to this significant growth in equities trading.
Fueled by a global surge in artificial intelligence stocks, relaxed capital regulations, and increased lending to hedge funds, major Wall Street banks are on track for a record-breaking year in equities trading, with one quarter remaining. The five largest investment banks reported approximately $67 billion in equities revenue through September 30, 2026, surpassing the previous record from 2025 by $7 billion.
The key players capturing the majority of this growth are Wall Street’s Big Three: Goldman Sachs, JPMorgan Chase, and Morgan Stanley—with these firms generating a combined total of $52 billion in stock trading revenue, representing nearly 80% of the total market.
Mike Mayo, a Wells Fargo banking analyst, stated, “When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that’s pretty much it. They’ve been best positioned to take advantage of this market.” The overall trading activity from both institutional and retail investors is driven by an exceptional performance in the stock market, spurred by substantial trading across stocks, ETFs, and derivatives.
The prime brokerage sector, offering hedge funds margin loans and securities lending, has become a significant area of growth for these banks. Demand for leverage, particularly concerning AI hardware, hyperscalers, and chip suppliers, has reached unprecedented levels, with Goldman Sachs reporting a 96% increase in its equities financing activities, totaling a record $3.37 billion in the third quarter alone.
JPMorgan and Morgan Stanley have noted similar trends in their financing activities but have not disclosed precise figures. Jeremy Barnum, JPMorgan’s CFO, remarked, “I like your ‘insatiable demand for capital’ point. That feels about right,” in reference to the growing demand during their third-quarter earnings call.
The transformation of equity desks at the Big Three is notable, shifting from cyclical, transactional operations to more sustainable, high-margin lending entities, according to Wall Street executives. The performance disparity between these leading banks and their competitors, such as Bank of America and Citigroup, underscores the widening gap in capital markets.
Rachid Alaoui, JPMorgan’s global head of equities, explained, “For clients, the value isn’t just a price on one trade, it’s coverage and continuity,” emphasizing the necessity for comprehensive service across products and regions, particularly during volatile market conditions. The largest banks possess the ability to absorb significant potential losses, enabling them to underwrite large trades that smaller banks cannot manage.
Moreover, U.S. prime brokers have gained from the exit of European banks like Credit Suisse from the equities market, highlighting the scale advantage of strong equities franchises, according to Bloomberg Intelligence analyst Herman Chan.
Picks and Shovels: Asia’s Growing Market
As U.S. markets focused on software and cloud computing, Asia has emerged as a rapidly expanding frontier for equities trading. Institutional investors have increasingly targeted South Korea and Taiwan, seeking opportunities in AI supply chain components, such as memory chip manufacturers and semiconductor firms. The Big Three’s extensive presence in Asia has turned this trade into a lucrative opportunity, although there are concerns about inflated revenue figures due to transaction taxes and varying definitions of equities trading revenue across banks.
While the importance of the early AI buildout is acknowledged by Goldman Sachs and Morgan Stanley, analysts caution that should AI fail to meet transformative expectations, a downturn could hit these institutions harder than others. The International Monetary Fund recently warned of potential risks associated with hedge fund leverage and correlated selling, estimating that global hedge fund assets have reached $13 trillion.
Jamie Dimon, CEO of JPMorgan, noted that overall leverage in the industry was at its highest, yet he downplayed immediate threats to financial markets. The prime brokerage sector has demonstrated resilience even amid challenges, with brokers adept at managing risks during tumultuous market conditions.
Regulatory Changes and Their Impact
The easing of some leverage regulations by Trump administration regulators has given the largest U.S. banks more latitude to expand their lending businesses, including prime brokerage. New rules finalizing in 2025, which allowed for the adoption beginning in January, have relaxed capital requirements previously applied to Treasurys and prime brokerage loans.
Darrell Duffie, a finance professor at Stanford University, highlighted that while this may lead to a more leveraged system, it hasn’t dramatically skewed financial stability. Wall Street executives have also reiterated their approach to managing risks associated with leverage, underscoring their focus on collateral and regular stress testing. According to Barnum, concerns regarding hedge fund leverage remain in the realm of “known unknowns,” suggesting that while risks exist, they are well understood.
News Courtesy of CNBC
