Wall Street just had its best investment banking quarter in years, and it is calling AI a super cycle

Wall Street's largest banks reported record investment banking fees in the second quarter, driven by what Goldman Sachs CEO David Solomon called an "AI CapEx super cycle." Goldman Sachs booked $3.4bn in fees, up 55%, while JPMorgan, Morgan Stanley, Bank of America, and Citigroup also posted significant gains, fueled by AI-related capital expenditure across data centers, energy, and technology. Combined net income for the five largest US banks reached roughly $49bn, up 39% year on year.

Goldman Sachs booked $3.4bn in investment banking fees in the second quarter, a record, up 55% on a year earlier. Its chief executive has a name for what is driving it. “We are in the middle of an AI CapEx super cycle where there are demands on financing into every single financing instrument, in every region of the world and across every single industry,” David Solomon told analysts on the firm’s 14 July earnings call https://www.sec.gov/Archives/edgar/data/886982/000088698226000294/a2q26gsearningsresults.htm . Within the total, equity underwriting rose 130% to $985m and debt underwriting rose 75% to a record $1.03bn. It is the same demand that pulled eight banks into SoftBank’s $40bn OpenAI loan https://thenextweb.com/news/softbank-40-billion-openai-loan-bank-syndication . The pattern held across the street. JPMorgan https://www.sec.gov/Archives/edgar/data/19617/000162828026048078/a2q26erfexhibit991narrative.htm reported $3.3bn in investment banking fees, up 30% and its highest since 2021. Morgan Stanley was up 58% to $2.44bn, Bank of America https://www.sec.gov/Archives/edgar/data/0000070858/000007085826000353/bac-06302026ex993.htm up 50% to $2.14bn, and Citigroup up 44% to $1.55bn, though Citi switched from reporting fees to reporting revenues this quarter, so its line is no longer like-for-like with peers. Ted Pick, Morgan Stanley’s chief executive, put a number on where the cycle sits. “You’re basically looking at us being around 10%-15% of the way through the investment cycle,” he said on 15 July, citing his own firm’s research forecasting data centre capital expenditure of roughly $850bn this year, $1.3trn in 2027, and possibly $1.5trn in 2028. He hedged it immediately. “ It’s really early, and I’m not sure we altogether know because of the known unknown element of this,” Pick said. “One has to have humility in all of this.” Jamie Dimon credited AI in JPMorgan’s written results, citing “AI-driven capital investment, fiscal stimulus and the benefits of more efficient regulation” among the tailwinds behind a resilient US economy. On the call he was less lyrical. “It’s getting close to as good as it gets,” he said. “We just don’t know how long it’s going to last.” Jane Fraser described the demand side at Citigroup. “AI is dominating a lot of the conversations. Tech, data center, energy, defense, CapEx is accelerating,” she said. “Wherever there’s a bottleneck in that whole energy power compute memory ecosystem, we’re seeing a lot of activity.” She pointed to SK hynix, which priced a $26.5bn American depositary receipt offering on 9 July. The most interesting remark of the week came from JPMorgan’s chief financial officer, and it was about the deals the bank did not do. “We passed on some deals,” Jeremy Barnum said. “When you look at the data center stuff, the key question is what happens with power supply? What happens with tenants? We saw some deals come through where we were just like, ‘Yeah, we’re not doing that.’” No bank disclosed a dollar figure for its data centre lending or AI infrastructure exposure. Not JPMorgan, not Goldman, not Morgan Stanley, Citi, or Bank of America. Asked directly to size AI’s contribution to Goldman’s results, Solomon declined. “I’m not sure that I can do that in a way where I give you a good answer,” he said. Combined net income across the five largest US banks came to roughly $49bn, up about 39% year on year. Advisory work, the business that actually involves bankers talking to clients, grew far more slowly than underwriting did: Goldman’s advisory line rose 17%, and Citi’s fell 4%. The money is in placing paper. He also supplied the quarter’s most useful corrective, twice. IPO volumes, he noted, were “kind of at or below the 10-year average” despite the record fee line. And on where this ends: “Ultimately, you will have a recalibration, a reset, a drawdown, and then a further acceleration.” The financing structures underneath are getting more exotic as the volumes grow. Meta raised $27.3bn https://www.bisnow.com/national/news/data-center-development/a-quiet-corner-of-private-credit-has-fueled-60b-in-data-center-development-134982 in a private placement with Blue Owl and Pimco for a single Louisiana campus, part of more than $40bn placed in that market since November. ICE is building futures contracts on compute https://thenextweb.com/news/ice-nyse-compute-futures-market-gpu-ai , and CoreWeave is trying to hedge memory chips https://thenextweb.com/news/coreweave-memory-chip-price-hedge , an asset with no market. Goldman reports again in October. Barnum’s two questions, power and tenants, are the ones to carry into it. Get the TNW newsletter Get the most important tech news in your inbox each week.