Written by: Marko Kais, CFA | AGF Investments
Artificial intelligence (AI) has been the dominant theme in equity markets throughout 2026. Investors have largely focused on the hyper-scalers and their enormous investments in AI infrastructure. Yet large-cap technology is only part of the story as AI is reshaping industries across sectors.
This edition of AI in focus puts banks in the spotlight.
Banks have re-emerged as one of the second-order beneficiaries of the ongoing artificial intelligence revolution after overcoming some initial skepticism surrounding deposit disintermediation and widespread job losses because of AI.
This resurgence stems from strong loan growth and capital markets activities, which are largely being driven by AI infrastructure spending from companies of all sizes. The hyperscalers are borrowing more capital than ever before as it’s become increasingly difficult to fund their massive projects entirely with their own money.
There is growing recognition that North American banks will realize cost savings over time. This isn’t likely to come through restructuring, however, but rather through improved productivity while costs grow slower than revenues. Many large banks report operational efficiency being improved through the streamlining and automation of historically documentation-heavy processes like mortgage applications. As such, the fear of AI-induced mass job disruption isn’t likely to materialize anytime soon.
Moreover, while it’s possible that competing institutions may eventually want to employ AI to optimize customer deposits, engrained consumer behaviour and a lack of regulatory compliant business models remain barriers for such products.
So, where are the opportunities for investors? U.S. banks have been among the biggest beneficiaries of this AI buildout. In Canada, some of the Big Six have been acquiring and developing in-house AI capabilities since the late-2010s and are well positioned to benefit from their head start. Meanwhile, Mexican banks are also seeing benefits from AI construction and nearshoring trends—the process through which manufacturing and assembly operations are moved closer to their end markets.
Unsurprisingly, the stock prices of the major North American banks reflect a first-mover advantage. Their enormous tech budgets have allowed them to lay the groundwork early. Whereas most European banks, conversely, are just arriving to the party. This could present some potential opportunities in terms of valuations but also reinforces the importance of being selective.
While it’s easy to hail companies across the supply chain as the obvious winners in the current market, we believe banks shouldn’t be ignored as beneficiaries of the ongoing AI revolution. They are lending money to the companies building the technology that will ultimately help cut their own costs.
