Everyone knows the AI boom has been great for Nvidia and other chipmakers. But there is a quieter group of winners that has been ticking up in the background: the biggest U.S. banks.
The KBW Bank Index, which covers a broader set of lenders, climbed 15%.
The reason is not that banks suddenly got great at AI. It is that they play a supporting role that does not get much press.
Wells Fargo equity strategist Ohsung Kwon describes big banks as an "AI-adjacent sector." They help finance the whole machine. When a company like SpaceX goes public, the banks that managed the deal earn huge fees. When hyperscalers - the giant tech firms building data centers and energy plants for AI - need to borrow tens of billions, banks are the ones lending the money. And when an IPO creates new millionaires and billionaires, those people often hand their wealth to the same banks to manage.
That last piece matters more than it sounds like. Kwon pointed out that it is "not just big revenue for investment banking, but also the wealth that was created from IPOs." He added that "that's also a tailwind to the banks' wealth management business as well."
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The second-quarter earnings reports this year backed that up. Because of the SpaceX IPO, Wall Street banks posted their strongest earnings from equity underwriting advisory work since 2021.
According to Wells Fargo data, large banks have beaten the S&P 500 by an average of eight percentage points during past IPO upcycles.
But not everyone is convinced that banks are a straight AI trade. BCA Research's chief US investment strategist Doug Peta said AI spending is exerting "greater influence" on economic activity and big-bank earnings. Still, he warned that banks are "not first, or even the second or third, places an investor should look to gain exposure" to AI. In fact, he said, "Banks have plenty of indirect exposures to AI spending, capital raising and corporate transactions, but they are not AI-adjacent trades unless nearly every space in the economy has become an AI-adjacent trade."
Banks benefit from the AI boom, but they are also tied to the broader business cycle. A recession would hit them hard no matter what AI does.
Investors are watching for upcoming IPOs from OpenAI and Anthropic. If those happen, they would generate another wave of fees for the big banks.
In June, Bloomberg indicated that OpenAI might postpone its IPO until next year. That news alone caused Morgan Stanley and Goldman Sachs shares to fall. So the path is not a straight line.
John Higgins, an analyst at Capital Economics, wrote a note on July 17 that put the whole thing in perspective. He pointed out that bank performance has been helped by "a healthy economy, as well as volatile markets and an M&A/IPO boom that have boosted trading income for financial services firms in general." Then he offered a fascinating twist: "If the stock market bubble in AI has already burst - which is plausible even if our baseline scenario is that it won't until 2027 - then banks are likely to keep outperforming the S&P 500 judging by the dot-com boom and bust."
During the dot-com crash, banks actually held up better than the tech-heavy market. If the AI trade wobbles, big banks could become a safer place to ride out the storm. And if it keeps booming, they still get a cut of the action.
For your money, the big question is how much of this is already priced in. Bank stocks have had a strong run, but the fees from future AI IPOs and lending are still mostly ahead of us. Whether you want to lean into that bet or wait for a clearer signal is up to you - but understanding how the banks fit into the AI story is a good place to start.
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