Wall Street’s Big Three Cash In on AI Boom and Relaxed Rules to Drive Record Equities Revenue

Driven by the global frenzy surrounding artificial intelligence, relaxed regulatory capital constraints, and robust lending to hedge funds, major Wall Street banks are on track to close out a historic year for equities trading. Even with an entire quarter still remaining in the financial calendar, the largest investment banks have already surpassed previous financial benchmarks, underscoring a massive transformation in how capital markets operate.

According to company filings, the five largest global investment banks generated approximately $67 billion in equities revenue through September 30. That staggering figure already eclipses the total amount generated by the group during the entirety of the previous year, which had itself set a record-breaking haul for the industry.

Yet, the lion’s share of this unprecedented financial windfall has been captured exclusively by Wall Street’s dominant trio. Goldman Sachs, JPMorgan Chase, and Morgan Stanley have collectively amassed a combined $52 billion in stock trading revenue over the first three quarters of the year, accounting for nearly 80% of the entire industry’s total pool.

"When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that’s pretty much it," Mike Mayo, a prominent banking analyst at Wells Fargo, told CNBC. "They’ve been best positioned to take advantage of this market."

Wall Street banks are currently navigating an epic run of blockbuster profits as the aggregate value of the global stock market balloons. Trading activity from both institutional and retail participants has surged across individual equities, exchange-traded funds, and complex derivatives. A major catalyst behind this sustained market activity is the heavy volume of capital that major banks are extending to hedge funds through their prime brokerage operations, allowing these institutional investors to significantly amplify their market bets.

Prime brokerage—the specialized institutional business of providing hedge funds with margin loans, securities lending facilities, and comprehensive execution services—has rapidly evolved into a fierce battleground and a primary engine of revenue growth. The prime brokerage units of the Big Three sit at the very center of the broader equities narrative because they maintain deep, longstanding relationships with the largest and most active funds operating across global markets and multi-asset products.

Institutional demand for leverage to finance aggressive bets on artificial intelligence hardware, hyperscale data center operators, and specialized semiconductor suppliers has reached historic highs, according to remarks from major bank executives.

At Goldman Sachs, equities financing activities surged by 96% in the third quarter alone, reaching a record-breaking $3.37 billion. While JPMorgan Chase and Morgan Stanley do not separately break down their specific financing figures in public disclosures, executives from both institutions noted that they are experiencing a remarkably similar market dynamic.

"I like your ‘insatiable demand for capital’ point. That feels about right," JPMorgan Chief Financial Officer Jeremy Barnum remarked during the bank’s third-quarter earnings conference call, responding directly to analyst inquiries regarding the extraordinary demand for financing.

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

This relentless demand has helped fundamentally transform the equities desks of the Big Three. Once viewed as cyclical, purely transactional businesses vulnerable to sudden market downturns, these desks have evolved into highly durable, high-margin lending engines, according to Wall Street executives.

The resulting performance gap between these market giants and their competitors—such as Bank of America and Citigroup—highlights an increasingly wide divide across global capital markets.

"For clients, the value isn’t just a price on one trade, it’s coverage and continuity," Rachid Alaoui, JPMorgan’s global head of equities, explained in an interview. "You want a dealer that can give you the full suite across products, and you want that service to travel with you across regions. That matters in stressed markets and periods of volatility."

Executing massive, multi-billion-dollar bets, such as complex leveraged swaps tied to volatile artificial intelligence stocks or sector exchange-traded funds, requires an exceptionally strong and flexible balance sheet. The largest investment banks possess the financial depth to absorb potential trading losses reaching upwards of $100 million without jeopardizing their quarterly financial results, according to industry executives. Conversely, smaller or more specialized niche banks simply cannot underwrite single-trade risks of that magnitude, forcing them to turn away profitable business or steadily cede market share.

Furthermore, U.S. prime brokers have capitalized significantly on the strategic retreat of major European financial institutions—including Credit Suisse and its eventual absorption by UBS—from the global equities and prime brokerage landscape, notes Herman Chan, an analyst at Bloomberg Intelligence.

"Prime is one of the ultimate scale businesses," Chan said. "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."

Picks and Shovels

While domestic U.S. markets have been heavily captivated by software developers and cloud computing giants throughout the year, trading executives note that the fastest-growing geographical frontier for equities has been found in Asia.

Institutional investors have poured capital aggressively into South Korea and Taiwan, targeting the foundational "picks and shovels" of the artificial intelligence supply chain. This includes the memory chipmakers, advanced foundries, and semiconductor manufacturers that are essential to the physical construction of modern data centers, Alaoui noted.

For the Big Three, which maintain deep physical and institutional footprints across financial hubs like Tokyo, Hong Kong, Seoul, and Mumbai, the surge in Asian trading activity proved to be an exceptionally lucrative goldmine. Nevertheless, industry executives point out that local transaction taxes and stamp duties are frequently folded directly into top-line revenue metrics, which can artificially inflate reported Asia prime totals.

Industry observers also note that there remains no universally agreed-upon definition of what specific metrics equities trading revenue should encompass. Some banking institutions incorporate ancillary business lines such as clearing services into their figures, while others explicitly exclude them from their stock trading totals, making precise, apples-to-apples comparisons difficult for analysts.

Despite these accounting nuances, the underlying operational momentum of the business remains unmistakable, superintended by a broader stock market rally that originally took root in October 2022, just weeks before OpenAI publicly released ChatGPT.

"We’re still in a stock-based world," Morgan Stanley CEO Ted Pick told analysts and investors during the firm’s earnings call. "Equities are still, all things being equal, the attractive asset class."

Even as the chief executives of Goldman Sachs and Morgan Stanley maintain that the global infrastructure build-out for artificial intelligence is still in its early years, financial analysts caution that should artificial intelligence ultimately fail to deliver on its transformative economic promises, a sharp market correction could disproportionately impact these heavily exposed institutions.

The unprecedented boom has also sparked broader regulatory and industry concerns regarding the systemic risks posed by highly leveraged hedge funds.

The International Monetary Fund warned that rapidly growing leverage, crowded market positions, and correlated selling patterns among hedge funds could introduce potential stability risks into the wider financial system. The IMF estimated that global hedge fund assets under management have swelled to an astonishing $13 trillion.

In August, JPMorgan CEO Jamie Dimon noted that industrywide leverage was at "the highest it’s ever been," though he stopped short of characterizing the potential risk as an imminent threat to the stability of financial markets.

Wall Street executives and market analysts have been quick to emphasize that the broader financial sector weathered a series of hedge fund meltdowns over the summer without systemic disruption. While a prominent hedge fund managed by former OpenAI researcher Leopold Aschenbrenner, known as Situational Awareness, captured significant media attention during a forced fire sale, several smaller funds also experienced forced unwinding events.

Prime brokers have grown increasingly adept at executing rapid margin calls and swiftly scaling back risk exposure whenever market conditions move against their clients, Alaoui explained.

"In the summer, some investors had positions they were forced to unwind," he told CNBC. "They deleveraged, risk came down, and the market moved on."

Known Unknowns

Another critical factor accelerating the equities trading boom is the regulatory shift implemented under the current administration. Regulators have eased several stringent financial crisis-era leverage rules for the largest U.S. financial institutions, providing them with significantly more breathing room to expand balance sheet-heavy operations, including prime brokerage services. These revised regulations were finalized in 2025, and major banks were granted permission to adopt them as early as January.

By rolling back strict balance sheet caps that historically treated ultra-safe U.S. Treasurys and fully collateralized prime brokerage loans identically to much riskier corporate assets, regulators have given institutional dealers greater operational flexibility to deploy capital efficiently.

"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 and an authority on financial stability. "It’s not a good idea, but it hasn’t gotten dramatically out of whack."

While the larger overall scale of the market and heightened volatility can naturally foster increased trading volumes, derivatives activity, and financial leverage, Duffie suggested that these developments are not inherently alarming on their own.

Wall Street executives similarly downplayed lingering concerns regarding systemic leverage, emphasizing that they rely heavily on strict collateral management frameworks and frequent, rigorous stress testing to anticipate and mitigate potential vulnerabilities before they materialize.

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