Ghosts of 1870s Railroad Investors Welcome AI Industry to the Group Chat
Bank of America says AI spending now beats the railroad boom as a share of GDP. The railroad investors have notes.
Satire This article is fiction. Any resemblance to sane reality is coincidental.
THE AFTERLIFE. A support group for investors who backed the railroads of the 1870s and the fibre-optic cables of the 1990s held an emergency session this week, after Bank of America suggested that the artificial intelligence industry might soon be eligible for membership.
The real part first. In a note to clients on Friday, Bank of America investment strategist Sebastian Raedler said the AI investment boom is so far following the classic capital-cycle playbook. He pointed out that 12-month forward consensus expectations for hyperscaler capital spending have climbed from $330bn in early 2025 to $1tn. That is about 3% of US GDP, compared with 2.2% during the 1870s railroad boom and 1.1% in the 1990s tech boom.
“Most major capital cycles of the past have ended in disappointment, even though the underlying technology often lived up to expectations,” Raedler wrote.
The support group responds
At the meeting, which we invented, a railroad investor in a stovepipe hat stood up to welcome the newcomers. “We were right about trains,” he said. “Trains were fantastic. Everybody uses trains. We just built nine lines to the same town and then charged each other less until nobody made any money.”
A fibre-optic investor from 1999 nodded. “We laid enough cable to reach the Moon and back. The internet happened, exactly as promised. Our share prices just did not come with it.”
Why the old-timers are nervous
The pattern Raedler describes goes like this. Early profits are high, so everyone invests. Too much capacity gets built. Competition rises, prices fall, and the investors who paid for the buildout end up handing most of the benefit to customers.
For AI, he noted that competition at the model layer has intensified, particularly from Chinese open-weight models, and that average token prices have fallen around 50% since the summer. Bulls argue that cheaper tokens will create so much new demand that total spending keeps rising, an idea economists call the Jevons paradox. But Raedler cited Ramp data showing US business spending on AI has faded slightly since August, even as token volumes kept rising sharply.
“This monetization disappointment in the face of intense competition is precisely the failure mode seen in past capital cycles,” he wrote.
Not every boom ends badly. The note says cloud computing in the 2010s avoided this fate because high barriers to entry kept competition limited. The question is whether AI looks more like the cloud or more like the railways.
A welcome pack
The support group has prepared a welcome pack for AI executives, just in case. It contains a commemorative railway spike, a length of unused fibre-optic cable and a laminated card that reads: “The technology works. Please manage expectations.”
The group stressed that membership is not automatic, and that some booms do end well. It then adjourned to argue about whether a chatbot could be a member.
Satire: the support group and its quotes are invented. Bank of America’s figures and quotes are real and reported by the outlets below. Nothing here is investment advice.