By 1873, The Railroad Boom Had Built Some Of The Largest Fortunes In American History. Then A Brutal Crash Bankrupted More Than 100 Railroads And Brought A 5-Year Depression. Now, Brookings Projects The AI Buildout Will Be An Even Larger Share Of The Economy Than The Railroad Mania AJ Tiarsmith Wed, October 7, 2026 at 7:26 AM EDT 4 min read ORCL +1.61% GOOG +0.22% MSFT +0.78% AMZN +1.95% META -0.41% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Oracle, Microsoft, and Amazon helped push hyperscaler capex past $400 billion in 2025, a figure that exceeded combined operating cash flow for the first time.
Meta and Alphabet fund an AI buildout projected at $9 trillion through 2032, averaging 3.22% of GDP and topping railroads' historic 2.24% share.
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Railroads made Cornelius Vanderbilt America's richest person by the 1860s, dying in 1877 with an estate estimated at $95 million to $105 million, larger than U.S. Treasury holdings. By share of GDP, Vanderbilt places third among the richest Americans, behind Rockefeller and Carnegie. Within years, his industry's financing gave way, a warning for today's AI expansion.
The rail network doubled from 35,000 to 70,000 miles between 1865 and 1872, with bonds financing more than three-quarters of it. On September 18, 1873, Jay Cooke's bank failed. The New York Stock Exchange closed for ten days, its first closure ever.
Smithsonian counts 121 bankrupt railroads; Wikipedia counts 55 by November and 60 more within the first year. About 18,000 businesses failed from 1873 to 1875. Track construction fell from 7,500 miles in 1872 to 1,600 in 1875. Within two years, a third of railroad bonds stopped paying interest. The depression lasted more than five years, ending in spring 1879.
Stijn Van Nieuwerburgh's Financing the AI Buildout, dated October 2, 2026, projects about $9.0 trillion in AI infrastructure investment from 2025 through 2032, averaging 3.22% of GDP per year and peaking at 4.96% in 2028.
The infographic draws parallels between the current AI buildout and the 1865-1873 railroad boom, illustrating projected AI investments and potential risks that led to a brutal crash in the past.
The paper says the expansion "would exceed" the major U.S. canal, railroad, electrification, highway and telecommunications investment booms.
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Railroads exceeded 4% of GDP in 1870 and 1881; the paper offers no peak-to-peak comparison.
The paper assumes 213.5 GW of announced capacity never gets built.
An earlier draft carried $10.3 trillion and a 3.63% share. Numbers may move again.
The railroad figure leaves out some locomotives and rolling stock.
Combined capital spending at Oracle (NYSE:ORCL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOGL) reached about $97 billion in 2020 and more than $400 billion in 2025, with more than $800 billion forecast for 2026, exceeding combined operating cash flow for the first time. A 10% unlevered return would require about $3.55 trillion in mature annual revenue, or about 81.3% annual growth through 2032.
Railroad track lasted decades; today's hardware may be obsolete in three to six years. Railroads sold bonds to the public; today's builders largely self-fund. The railroads got built and carried freight for a century. The financing stacked on top failed, with losses falling largely on those who funded the track. The suppliers who sold the rails, ties and locomotives got paid either way, which is the same reason we pulled together seven power, cooling and networking companies behind the expansion of computing facilities for AI workloads in a free report you can grab here.
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