Wall Street banks reap record fees as AI capex cycle hits tipping point

Goldman Sachs and JPMorgan Chase reported record quarterly revenue on Tuesday, driven by massive surges in equities trading and investment banking tied to the global artificial intelligence buildout. Goldman’s revenue jumped 39% to $20.3 billion, while JPMorgan climbed 27% to $58 billion.

The most immediate financial impact appeared in equities trading, where shifting global capital flows produced the quarter's largest revenue surprises. JPMorgan's equities trading revenue rose 86% to $6 billion, and Goldman's increased 72% to $7.42 billion. Combined, the two banks beat analyst expectations by $4.4 billion. Bank of America also benefited, posting a 70% increase to $3.6 billion.

This trading surge reflects a broadening of the AI investment thesis beyond Silicon Valley chips and software into power providers and infrastructure players. Investors are actively looking for international exposure to the theme. "People looked at the AI trade and said, 'What are the best reflections of it outside the U.S.?'" said Soofian Zuberi, president and co-head of Global Markets at Bank of America. He noted that American institutions are diversifying heavily into Asian markets like South Korea, Taiwan, and Japan.

Investment banking fees surged alongside trading activity as banks advised on AI-driven deals and financed the physical infrastructure required for data centers. Goldman's investment banking revenue climbed 55% to $3.4 billion, bolstered by its lead roles on the SpaceX IPO and Alphabet's $90 billion equity issuance. JPMorgan's investment banking revenue rose 30% to $3.3 billion. Together, the figures beat estimates by $1 billion.

Executives framed the results as the early innings of a historic infrastructure financing cycle. "We are in the middle of an AI capex super cycle where there are demands on financing in every single financing instrument, in every region of the world and across every single industry," said Goldman CEO David Solomon. He noted the bank is preparing for a three-to-five year investment cycle that remains in its early stages.

Wells Fargo analyst Mike Mayo said the AI investment boom "reached a tipping point" in the second quarter, naming Goldman, JPMorgan, and Morgan Stanley as the top beneficiaries. Mayo raised his price targets for the two reporting banks following the results. Goldman shares jumped 8% in afternoon trading, while JPMorgan rose 2%.

Banks are simultaneously cutting costs by implementing AI internally, creating a dual revenue-and-efficiency dynamic. "AI is driving banking by helping streamline processes," Zuberi said. "And banking is driving AI, because without banking you can't have all these data centers financed."