EnterpriseMSFT -0.39%OCT 17, 2026

BofA Warns AI Token Prices Have Fallen 50% as Hyperscaler Capex Hits $1 Trillion

Bank of America strategist Sebastian Raedler says AI pricing is tracking past capital-cycle busts — a dynamic that is already cutting the unit cost of AI tools for small-business buyers.

BY GRETA REINHART · ENTERPRISE SAAS

Average AI token prices have fallen roughly 50% since the summer while 12-month forward hyperscaler capex expectations have climbed from about $330 billion in early 2025 to near $1 trillion, Bank of America strategist Sebastian Raedler told clients in an October 16 note. His framing: that capex figure is approaching 3% of US GDP, more than the 2.2% peak reached during the 1870s railroad buildout and well above the 1.1% peak of the 1990s tech expansion.

The pattern is familiar. “most major capital cycles of the past have ended in disappointment, even though the underlying technology often lived up to expectations,” Raedler wrote. “This monetization disappointment in the face of intense competition is precisely the failure mode seen in past capital cycles.”

Markets responded in character. Palantir and ServiceNow each fell 5% on October 16, Salesforce slid 4%, and the iShares Expanded Tech-Software ETF dropped 4%, per 24/7 Wall St. The QQQ shed 1.35%. The Philadelphia Semiconductor Index has now fallen for seven straight sessions, about 13% below its recent high, Invezz reported. Meta, Lam Research, and Texas Instruments report next week, Reuters noted via The Star, in what will be the first live test of whether hyperscaler capex guidance survives contact with revenue.

Underneath the vendor pain sits a buyer-side inversion that doesn’t get much airtime. Ramp data cited by Bank of America shows token volumes rising substantially even as total US business AI spending has edged down since August. Translation: companies are getting materially more AI work per dollar. The same competitive dynamic Raedler flags as the investor failure mode, intense price competition without matching monetization, is a direct cost advantage for the buyer.

That dynamic has been building for weeks. It arrived publicly with Anthropic cutting Haiku 5.5 prices 90% and hardened with the OpenAI revenue correction that reset vendor pricing across the stack. What looks from the equity desk like a monetization crisis looks from a five-to-thirty-person company like the cheapest customer-acquisition compute of the cycle.

Capital cycles tend to end the same way: the investors underwrite the infrastructure, and the operators inherit it.

Sources

About the author

Greta Reinhart

ENTERPRISE SAAS

Greta Reinhart tracks the enterprise software stack from San Francisco — data platforms, AI bundling, seat pricing, and channel checks across the largest SaaS vendors. She files on go-to-market shifts, packaging changes, and quarterly enterprise reads.