Key Takeaways
- • The five largest US investment banks generated $67bn in equities revenue in the first nine months of 2026, exceeding last year's full-year record by approximately $7bn, according to a Daily Upside report citing CNBC analysis.
- • Goldman Sachs, Morgan Stanley and JPMorgan Chase together accounted for $52bn, or nearly 80% of the total, with Goldman Sachs leading at more than $19bn, up 57% year-on-year.
- • Goldman Sachs reported a 96% increase in equities financing revenue in the third quarter, driven by rising hedge fund demand for leverage and looser bank leverage requirements.
- • The IMF estimates hedge fund assets have reached $13tn, up from $4tn in 2013, with leverage driving much of the increase and potentially amplifying volatility during stress periods.
- • Goldman Sachs data shows hedge funds sold technology stocks at the fastest pace in at least a decade last week, and net leverage among its hedge fund clients fell to a one-year low, though tech still made up nearly a quarter of holdings as of 15 October.
Summary
Surging demand for financing from hedge funds, partly fueled by leveraged investments in artificial intelligence, has pushed Wall Street's largest banks to record equities trading revenues in 2026, according to a Daily Upside report citing CNBC analysis. The five largest US investment banks generated $67bn in equities revenue during the first nine months of 2026, exceeding last year's full-year record by approximately $7bn. Goldman Sachs, Morgan Stanley and JPMorgan Chase accounted for $52bn of that total, or nearly 80%.
Goldman Sachs led the group with more than $19bn in equities revenue, up 57% year-on-year, followed by Morgan Stanley at approximately $17bn and JPMorgan at $15bn. Hedge funds' growing appetite for leverage has boosted prime brokerage activity, supported by looser bank leverage requirements. Goldman Sachs reported a 96% increase in equities financing revenue in the third quarter, while JPMorgan CFO Jeremy Barnum acknowledged exceptionally strong demand for capital during the bank's earnings call.
The expansion has raised concerns about the risks of leveraged hedge fund positions, particularly in technology stocks. The International Monetary Fund estimates hedge fund assets have reached $13tn, up from $4tn in 2013, with leverage driving much of the increase and potentially amplifying market volatility during periods of stress.
Hedge funds have recently reduced their technology exposure, with selling in the sector occurring at the fastest pace in at least a decade last week, according to Goldman Sachs. Net leverage among the bank's hedge fund clients fell to a one-year low, although technology stocks still accounted for nearly a quarter of their holdings as of 15 October. The risks of concentrated leveraged positions were underscored by the collapse of hedge fund Situational Awareness during July's semiconductor selloff, when losses on heavily leveraged AI trades forced the fund to unwind its positions.
While recent losses have largely been absorbed by hedge funds rather than their financing banks, a broader correction in AI-related equities could put further pressure on leveraged portfolios and increase risks across the prime brokerage market.
Goldman Sachs led the group with more than $19bn in equities revenue, up 57% year-on-year, followed by Morgan Stanley at approximately $17bn and JPMorgan at $15bn. Hedge funds' growing appetite for leverage has boosted prime brokerage activity, supported by looser bank leverage requirements. Goldman Sachs reported a 96% increase in equities financing revenue in the third quarter, while JPMorgan CFO Jeremy Barnum acknowledged exceptionally strong demand for capital during the bank's earnings call.
The expansion has raised concerns about the risks of leveraged hedge fund positions, particularly in technology stocks. The International Monetary Fund estimates hedge fund assets have reached $13tn, up from $4tn in 2013, with leverage driving much of the increase and potentially amplifying market volatility during periods of stress.
Hedge funds have recently reduced their technology exposure, with selling in the sector occurring at the fastest pace in at least a decade last week, according to Goldman Sachs. Net leverage among the bank's hedge fund clients fell to a one-year low, although technology stocks still accounted for nearly a quarter of their holdings as of 15 October. The risks of concentrated leveraged positions were underscored by the collapse of hedge fund Situational Awareness during July's semiconductor selloff, when losses on heavily leveraged AI trades forced the fund to unwind its positions.
While recent losses have largely been absorbed by hedge funds rather than their financing banks, a broader correction in AI-related equities could put further pressure on leveraged portfolios and increase risks across the prime brokerage market.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.