AI Boom Enriches Top Earners as K-Shaped Economy Sets In

Households in the top income quintile held $56.3 trillion in stock and mutual-fund wealth in the second quarter. That amounts to 87% of all household stock and mutual-fund wealth in the country, according to the latest Federal Reserve data. JPMorgan Asset Management, in a new report led by CEO George Gatch, says the divide between asset owners and those without assets isn’t likely to close anytime soon.

The bank’s warning is blunt. Lower-earning households are struggling as higher-earning Americans do well, and capital gains are expected to grow faster than labor income in coming years. The report says asset owners captured wealth from the post-pandemic AI boom, while people without stocks got left out.

Who Gets the Gains

The S&P 500 has climbed 70% in five years. JPMorgan expects U.S. large-cap stocks to grow about 7.5% a year. In its base case, the bank estimates AI could lift U.S. total factor productivity growth to about 1.2% annually. But JPMorgan concedes it’s unclear how those gains will reach lower- and middle-income Americans.

Even the top shows cracks. The report noted signs that higher-earning Americans are cutting back on spending amid hotter inflation and high gas prices.

JPMorgan called the arrangement “a metastable state — surprisingly durable, but sensitive to stress or shock.” The bank wrote that a miscalculation in the balance between the upper and lower parts of the K is “the greatest risk” to its outlook. Workers could demand more resources than economists expect, destabilizing the broader system. Attempts to redistribute AI-related capital returns could discourage investment. And if the investment boom fails to significantly raise productivity, the bank warned of “widespread capital misallocation” and slower growth.

Wall Street’s Windfall

The banks closest to the boom are cashing in. The five biggest investment banks generated about $67 billion in equities revenue through Sept. 30, according to company filings. That’s $7 billion more than they earned during all of 2025, itself a record. Goldman Sachs, JPMorgan Chase and Morgan Stanley together brought in $52 billion, nearly 80% of the total.

Wells Fargo banking analyst Mike Mayo put it plainly: “When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that’s pretty much it. They’ve been best positioned to take advantage of this market.”

Much of the growth comes from lending to hedge funds. Goldman’s equities financing revenue climbed 96% in the third quarter to a record $3.37 billion. On the bank’s third-quarter call, JPMorgan CFO Jeremy Barnum said an analyst’s “insatiable demand for capital” point “feels about right.” Executives said this activity has turned the Big Three’s equities desks from cyclical, transactional businesses into more durable, high-margin lending engines.

The Oversight Question

Leverage is rising as guardrails loosen. Trump administration regulators eased some leverage rules for the largest U.S. banks, giving them more room to expand balance-sheet-intensive businesses like prime brokerage. Regulators finalized the revised rules in 2025, and banks could adopt them as early as January. The changes eased caps that had treated Treasurys and collateralized prime-brokerage loans like riskier assets.

Stanford finance professor Darrell Duffie, a financial-stability expert, said, “Capital did go down, so you have to say the system is somewhat more levered because of the relaxation in regulations. It’s not a good idea, but it hasn’t gotten dramatically out of whack.”

The International Monetary Fund warned this month that rising leverage, crowded positions and correlated selling by hedge funds could threaten stability, and put global hedge-fund assets at $13 trillion. In August, JPMorgan CEO Jamie Dimon said industrywide leverage was “the highest it’s ever been,” though he stopped short of saying it threatened markets. Several hedge funds collapsed over the summer, including Situational Awareness, the fund run by former OpenAI researcher Leopold Aschenbrenner. Barnum called hedge fund leverage “very much in the category of known unknowns.”

Markets have already flashed jitters. The S&P 500 fell 1.1% last Friday during a final wave of AI selling, and the Cboe Volatility Index jumped from below 16 to above 22 in two hours. Debt concerns around data-center construction weighed on CoreWeave, Iren and Nebius shares, which fell sharply over the previous month.

Why This Matters: The boom lifting fortunes at the top is leaving much of the country on the outside looking in. The top fifth of earners holds 87% of household stock wealth, so a market-driven expansion rewards people who already own assets. JPMorgan itself says it’s unclear how AI’s productivity gains will reach lower- and middle-income Americans. Regulators have also loosened leverage rules as the IMF warns about hedge-fund risk. If the AI bet disappoints, the fallout won’t stay on Wall Street. Workers and households without stock portfolios would still feel the slowdown. Questions about oversight and who shares in the gains aren’t abstract. They concern the stability of the whole economy.