Wall Street Giants Seen as Hidden Beneficiaries of AI Boom
Taylor Wilson
Some strategists are repositioning Wall Street's biggest banks as underappreciated plays on the AI investment cycle — a major-bank index is up 14% this year, beating both the S&P 500 and Nasdaq 100, but the logic is far from settled.
Why would banks have anything to do with AI?
Wells Fargo equity strategist Ohsung Kwon calls large banks an "AI-adjacent sector" — they don't build AI, but they finance the companies that do.
Bloomberg's big-bank index (Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley) is up 14% year-to-date, versus 8.3% for the S&P 500 and 11% for the Nasdaq 100.
This means → as money rotates out of chip stocks, part of it is landing on names that profit from AI without making it.
How do IPOs and financing demand translate into bank profits?
Kwon sees the market in the early stage of an IPO upcycle. Historically, big-bank stocks outperform the S&P 500 by roughly 8 percentage points during such cycles.
Q2 earnings confirmed the thesis: equity-underwriting revenue hit its highest level since 2021. SpaceX's record IPO alone earned Goldman and Morgan Stanley about $100 million each in fees.
OpenAI and Anthropic are expected to list, and every major bank is competing for the mandate. In plain terms = these AI companies need to go public; the banks that take them public collect the fees directly.
Beyond IPOs — what other revenue paths exist?
Goldman CEO David Solomon laid out a broader case: the AI investment cycle drives sustained capital demand across infrastructure, energy, and data centers.
Hyperscale cloud operators are borrowing tens of billions of dollars to fund AI buildouts — loans and financing arrangements that feed banks' corporate-lending books.
Large IPOs also create a wealth effect that benefits banks' wealth-management arms. In plain terms = when founders and employees cash out, that money needs managing — another fee stream for the banks.
Are big banks really an AI play?
BULL
Financing demand is real
AI infrastructure needs tens of billions in loans — banks are the pipes.
IPO cycles have a pattern
Historically, big banks outperform the S&P 500 by ~8 pp during IPO upcycles.
Revenue already showing up
Q2 underwriting revenue hit a post-2021 high — not a forecast, a fact.
BEAR
Banks are macro-cycle stocks
BCA strategist Doug Peta says banks' link to the broad economy dwarfs any AI tie.
Indirect exposure ≠ AI play
Unless every sector counts as AI-adjacent, banks don't qualify.
The AI trade itself is shaky
News that OpenAI may delay its IPO sent Goldman and Morgan Stanley shares lower.
Put simply = the bulls point to money banks are already earning; the bears point out that the source of that money isn't locked to AI. Both sides cite facts — the disagreement is about which box you put the banks in.
Even if the AI trade unwinds, can banks still outperform?
Capital Economics' John Higgins argued in a July 17 report that big-bank stocks could keep beating the S&P 500 even if the AI trade reverses.
His case rests on three independent pillars: a healthy macro backdrop, rising market volatility boosting trading revenue, and a broader M&A and IPO boom.
He cited historical data from the dot-com bust. This reflects a pattern: even when tech-stock bubbles pop, bank stocks tend to outperform. The KBW Bank Index is up 15% year-to-date.
What does this mean for ordinary investors?
This means → some strategists are re-pricing big-bank stocks as "financial plumbing for AI infrastructure," not just macro-cycle plays.
The risk is equally clear: any shift in the AI-listing timeline — such as OpenAI delaying its IPO — can directly hit bank share prices.
In plain terms = if you believe the AI investment cycle will persist, big banks offer a way to participate without buying chip stocks. But if AI spending slows, the logic behind that path loosens too.
Content is for reference only, not financial advice.