Wall Street trades on AI-mania

Between the banking rivals, Morgan Stanley has long been valued higher, in part thanks to its more predictable wealth management business, meticulously built by former CEO James Gorman. Deals come and go; stickier businesses should theoretically strengthen over time. On a multiple of book value, Morgan Stanley under boss Ted Pick has retained its premium, at **3.9 times** compared to **3.1 times** for Goldman. When it comes to expected earnings, however, Goldman has caught up, with both commanding almost **16 times**. Even when AI froth wanes, both Pick and Solomon will have expanded in ways that should help boost results longer-term. Goldman, for example, plowed billions of dollars into its worldwide banking and markets division last quarter, giving it the resources to support the wave. Bankers and traders will have ways to benefit whenever the downturn comes, helping customers offload stock and restructure debt. After that, attention will turn quickly to whether Wall Street was able to engineer a swap from market momentum into sustainable finance. SpaceX shares just slipped below the IPO price; nothing goes up forever. Deal advisory and stock underwriting helped power the results, led by SpaceX's **$75 billion initial public offering**. The two investment banking giants rank one and two in worldwide M&A this year, with Goldman's consiglieri advising on more than **$1 trillion** of M&A transactions, according to LSEG data. Ebullient markets, which also have been swinging wildly, prompted clients to scramble for derivatives and financing. Chatbot fever powered much of the activity. SpaceX is only the clearest example. In South Korea and Taiwan, local AI-tethered champions SK Hynix and TSMC have kept Goldman and Morgan Stanley busy. Seoul's benchmark KOSPI Index more than doubled from the start of the year through late June, only to collapse into a bear market that scarred retail traders who borrowed heavily. Wall Street’s dynamic duo has plenty to celebrate. For one, Goldman Sachs and Morgan Stanley generated nearly **$14 billion** of combined revenue trading equity in the second quarter, some **70% more than a year ago**, as they capitalized on artificial intelligence mania. There's a slight awkwardness to the bonanza, however, after years of talking up the virtues of transitioning into more predictable business. The challenge will be to parlay tech euphoria into something more durable. Goldman boss David Solomon on Tuesday touted an astonishing **26% return on tangible equity**, beyond the capital efficiency typically seen following the 2008 financial crisis. Morgan Stanley followed up with a similarly impressive return just shy of **27%**.

Wall Street trades on AI-mania

Valuation gap remains as both banks expand

Deal activity and market swings fuel results

Goldman and Morgan Stanley ride AI-fueled trading

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