The market got great news from the big banks this week. All five of the largest U.S. banks reported second-quarter earnings on Tuesday, and they were almost uniformly outstanding. But although the U.S. consumer appears healthy, it was market-related activity like initial public offerings (IPOs) that really stood out.
JPMorgan Chase (JPM +0.47%) and Goldman Sachs (GS +1.44%) led the earnings parade as the two top investment banks in the country, and these divisions drove high growth in the quarter; investment banking revenue increased 45% year over year at JPMorgan Chase and 55% at Goldman Sachs.
CEOs at both banks said they see more opportunity around the corner, with artificial intelligence (AI) playing a big role. In fact, JPMorgan Chase CEO Jamie Dimon said he thinks AI spend is going to reach $1 trillion next year.
JPMorgan Chase CEO Jamie Dimon. Image source: JPMorgan Chase.
On the second-quarter earnings call, Dimon posited that total capital expenditure is about $4 trillion, with AI representing a massive amount. "AI went from $400 billion last year to $700 billion this year," he said. "People project, which so do our people, it will be like a little over a trillion next year and maybe a little reduction in the non-AI capex."
That implies that in 2027, AI spend will account for more than a quarter of all company spend.
NYSE: JPM
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He also cautioned that even though the current market is "getting close to as good as it gets," investors shouldn't forget the most important thing: "We just don't know how long it's going to last."
In the near term, though, the AI party is going strong, and investors can look forward to more expansion and matching stock prices.
