The four major U.S. banks released eye-catching quarterly reports. Why are these banks considered AI concept stocks?

The four major U.S. banks released eye-catching quarterly reports. Why are these banks considered AI concept stocks?

AI is booming, and leading U.S. banks are following suit. The fate of Wall Street banks has been deeply bound to this AI wave. Where will they go after this carnival?

Last night, four of the five largest investment banks on Wall Street - JPMorgan Chase, Bank of America, Citigroup and Goldman Sachs - successively announced their second-quarter financial reports, and Morgan Stanley will announce it today.

In the second quarter, which was marked by violent market fluctuations and frequent large-scale mergers and acquisitions, the performance of these banks was unsurprisingly outstanding.

Industry statistics show that the total stock and bond trading revenue of the above four banks reached US$38 billion, an increase of more than one-third compared with the same period last year, and a 60% increase from two years ago.

At the same time, investment banking fee income also reached $10 billion this quarter, an increase almost as much as trading income. The stocks of these banks have been on a tear lately. Goldman Sachs, Morgan Stanley and Citigroup have all doubled their share prices in the past 24 months.

The media commented on this round of Wall Street carnival and said: This is a by-product of the AI boom.

In addition to stock trading and investment banking, AI is also fully infiltrating into other business sectors of these banks: "hyper-scale cloud service providers" are raising funds through the issuance of huge bonds; employees and investors of technology giants whose values have soared continue to inject vitality into the wealth management business;

investments in data centers and computing infrastructure have also provided a steady stream of growth momentum for the corporate loan business... Note: The figure shows the total annual investment banking business income of the five major banks calculated on a rolling four-quarter basis.

"Pure AI concept stocks" The industry pointed out that among these leading banks, Goldman Sachs is almost a pure market vane; Morgan Stanley relies on its huge wealth management business to share the leverage dividends of the rising stock market.

In contrast, although Citigroup's traditional investment banking and trading businesses have performed solidly, they are still subject to the retail banking sector, which is in the midst of recovery and restructuring.

Although the huge commercial and retail banking businesses of JPMorgan Chase and Bank of America have diluted the explosive power of their stock prices, they still outperform the S&P 500 Index in the long run. Note: The dark red line in the figure is the stock price trend of the S&P 500.

Investors who are worried about bubbles may be inclined to take profits from pure investment banks such as Goldman Sachs and Morgan Stanley, and then turn to the other three banks with more "all-round" attributes. After all, Goldman Sachs and Morgan Stanley have doubled their price-to-book ratios (P/B) in just two years.

Note: The picture shows the price-to-book ratio trends of five banks. However, such attempts to diversify may be futile. Once the AI track undergoes a drastic reversal, it will be far more than just investment banking and trading business income that will be hit hard.

It would also worsen credit quality in commercial banking and lead to a reduction in assets under management in the wealth management segment. By then, the Federal Reserve will lower short-term interest rates in order to stop the bleeding, which will further compress banks' net interest margins.

Some media concluded that today's large bank stocks are essentially pure AI concept stocks and are closely related to the current AI craze.

In fact, just as major banks were celebrating their success, IT giant IBM revealed that some customers had postponed software purchase plans in order to purchase increasingly expensive hardware such as servers, storage and memory. IBM's stock price immediately fell by more than 25%, the largest single-day drop in decades.

Although this does not mean that the market's appetite for AI is narrowing, it is a timely reminder that corporate budgets are ultimately limited.

JPMorgan Chase CEO Dimon, who has always been cautious, has previously warned that the bank is currently in a state of "excessive profitability." At Tuesday's meeting, he once again reminded analysts that the ups and downs of the credit cycle are normal; JPMorgan Chase's financial director also hinted that some competitors are abusing the relationship credit model when financing data centers - giving up risk control in order to compete for future business.

Industry insiders pointed out that this kind of rational review comes at the right time. The current price-to-book ratios of these major banks have soared to levels not seen since the 2008 financial crisis.

Although bank balance sheets are now far more resilient than before, the technology boom has given rise to a new type of financial fragility: the technology industry is fully embedded in the national economy, forming an independent strong cycle, and Wall Street is no longer the only anchor to the macro cycle.

Violent fluctuations in the AI track will impact banks from multiple dimensions: credit, trading, and wealth management. (

#Stocks #AI #Fed #Bonds #Gold