Wall Street banks rake in record trading windfalls on AI frenzy

Wall Street's major investment banks are posting record trading revenues, driven by a surge in AI investment and a sharp rise in stock market activity. What makes this boom stand out is its backdrop: unlike past trading windfalls that came amid financial crises and market turmoil, this one is unfolding against all-time high stock prices and a retail investor frenzy.

According to the Wall Street Journal, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup are on track to post their best-ever annual trading results, fueled by a surge in second-quarter volumes. If current trends hold, the five banks' combined trading revenue this year is expected to reach $180 billion.

The timing is striking. In the past, sharp spikes in trading revenue typically coincided with periods of financial market stress. Several banks set their previous records in 2009, in the immediate aftermath of the global financial crisis.

This year is different. US stock markets have held near all-time highs even as trading volumes have surged. The AI investment boom, combined with geopolitical unease, has pushed retail investors to pile into high-risk products such as short-dated options and leveraged ETFs. Hedge funds have also ramped up ultra-short-term trading, and President Donald Trump is reported to have executed thousands of trades in a single quarter.

JPMorgan's chief financial officer Jeremy Barnum said market-related revenues "have been running at very elevated levels for a long time," adding that "there's clearly a very strong risk-on tone in markets right now."

Other financial firms on Wall Street are also riding the boom. Citadel Securities, one of the largest US market makers, posted a record $4.3 billion in first-quarter trading revenue. Scott Rubner, Citadel's head of equity and equity derivatives strategy, said average daily retail stock trading volume in May and June hit an all-time high, more than doubling from a year earlier.

BlackRock, the world's largest asset manager, attracted $192 billion in new inflows over the past three months, pushing its assets under management above $15 trillion for the first time. CEO Larry Fink said he holds a "very optimistic" outlook for global financial markets.

Second-quarter trading revenue at the five major US banks rose an average of 38 percent from the same period last year. Goldman Sachs led the group with a 54 percent increase, followed by JPMorgan at 35 percent and Bank of America at 33 percent.

The banks earn fees by buying and selling equities, bonds, raw materials and currencies on behalf of customers. According to Bloomberg Intelligence, average daily US options volume in the second quarter reached approximately 73 million contracts, while equity trading volume hit 20 billion shares — both all-time highs.

The AI frenzy has driven the S&P 500 to set new all-time highs 24 times this year. The anticipated listing of SpaceX — widely expected to be the largest initial public offering in history — has also drawn strong investor attention, with options volume hitting a record within hours of the listing's debut.

Strong corporate earnings and a recovering US economy continue to draw retail investors into the stock market. Institutional investors, meanwhile, are frequently rebalancing their portfolios in response to geopolitical risks and elevated market volatility. The combination of demand for outsized gains and protection against downside risk is feeding the rise in trading volumes.

Goldman Sachs CFO Denis Coleman said a widening "market dispersion" — a growing divergence in returns between individual stocks — is becoming more pronounced.