Goldman Sachs, JPMorgan and Morgan Stanley extend lead in AI-driven equity trading

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Ai-driven equity trading gains

Highlights

The five largest investment banks generated $67 billion in equities revenue through Sept. 30, surpassing their full-year 2025 revenue by $7 billion, driven by aggressive hedge fund leverage in AI-related sectors.
Goldman Sachs equities financing revenue surged 96% to a record $3.37 billion in Q3, as JPMorgan and Morgan Stanley reported similar trends fueled by escalating AI-driven demand.
Revised leverage rules, taking effect as early as January 2025, will loosen regulatory constraints, further strengthening large banks' capacity to provide prime brokerage as AI-related market activity increases.

AI financing demand lifts prime brokerage revenues

As reported by CNBC, the surge in equity trading is being driven in large part by hedge funds borrowing more aggressively to finance leveraged bets on AI hardware, hyperscalers and Asian semiconductor supply chains. Through their prime brokerage operations, the biggest banks are extending margin loans, securities lending and related services to large funds, reinforcing their position in one of the industry's fastest-growing businesses.

The five biggest investment banks have produced about $67 billion in equities revenue through Sept. 30, based on company filings, already exceeding the group's full-year 2025 total by roughly $7 billion. Goldman Sachs, JPMorgan Chase and Morgan Stanley account for the bulk of that performance, with their scale allowing them to serve the largest clients across markets and products.

Bank executives say financing demand tied to AI remains exceptionally strong. At Goldman Sachs, equities financing revenue rises 96% in the third quarter to a record $3.37 billion, while JPMorgan and Morgan Stanley say they are seeing a similar pattern without disclosing comparable figures.

Scale and looser leverage rules widen the gap

The dominance of the three banks also reflects the size of their balance sheets, which lets them absorb potential losses and manage risks that smaller rivals are less able to take on. That advantage is becoming more important as market volatility, derivatives activity and leverage increase alongside the broader rally in AI-related assets.

Regulatory changes are also supporting the expansion. Trump administration regulators finalize revised leverage rules in 2025 and allow banks to adopt them as early as January, easing prior balance-sheet constraints on businesses such as prime brokerage and giving large dealers more flexibility to deploy capital.

The rapid buildup in hedge fund leverage is still drawing scrutiny. The International Monetary Fund warns this month that growing leverage, crowded positions and correlated selling could pose financial stability risks, while analysts say a sharper reversal in AI enthusiasm could hit the most exposed banks harder than peers, even as executives argue collateral practices and stress testing help contain those risks.

Our earlier article on U.S. AI data center expansion examined how the infrastructure boom is colliding with higher financing costs, construction delays, and power-grid constraints. It highlighted that a significant share of planned projects may be unrealistic, while funding pressures and cost overruns are already shaking investor confidence and complicating developers’ ability to deliver capacity on time.

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