Artificial intelligence has dominated Wall Street's attention this year. Investors have obsessed over capital spending, shrinking free cash flow and whether the hyperscalers are overspending on AI.

Yet one of the market's oldest indicators is quietly telling a very different story.

According to Ed Yardeni, a theory developed more than 100 years ago still suggests the bull market has further to run.

"Dow Theory remains bullish," Yardeni said in his latest sector outlook.

Why a Century-Old Theory Still Matters

Dow Theory dates back to Charles Dow, who argued that a healthy bull market requires confirmation from two corners of the economy.

Industrial companies must make goods. Transportation companies must move them.

If both the Dow Jones Industrial Average and the Dow Jones Transportation Average reach new highs together, the market is signaling that economic activity is expanding broadly rather than being driven by speculation alone.

That's precisely what Yardeni sees today.

"The Dow Jones Industrials Average and the Dow Jones Transportation Average remain in record-high territory," he said.

The iShares Transportation ETF (IYT) has risen nearly 17% year-to-date, doubling the SPDR S&P 500 ETF Trust (SPY)'s return.

Notably, transportation stocks have outperformed the tech sector itself, as represented by the Invesco QQQ Trust (QQQ).

The AI Boom Is Showing Up in an Unexpected Place

The surprising part isn't that transportation stocks are rising—it's why.

The sector is becoming an indirect beneficiary of the AI infrastructure race, Yardeni argues. Every new hyperscale data center requires enormous quantities of steel, concrete, electrical equipment, transformers and cooling systems.

Much of that cargo travels by rail before reaching construction sites.

"The rebound in rails coincides with the data center construction boom," Yardeni said. "Rails haul the materials and equipment needed to build data centers."

Analysts have responded by sharply lifting their forecasts.

Consensus expectations for S&P 500 rail transportation revenue growth in 2026 have climbed to 6.6%, more than double the 2.9% estimate from March.

Forward earnings for rail companies, flat for several years, are now reaching record highs.

The Market May Be Looking in the Wrong Place

Much of Wall Street remains focused on whether soaring AI capital spending will hurt Big Tech profits.

Alphabet Inc. and Tesla Inc. both sold off after reporting earnings despite strong revenue growth, as investors worried about deteriorating free cash flow.

Yardeni sees the spending differently.

Rather than destroying value, he argues the money is simply flowing elsewhere in the economy.

Semiconductor companies continue to benefit from hyperscaler investment, while industrial businesses—from railroads to infrastructure suppliers—are increasingly capturing the second-order effects of the AI buildout.

One Risk to Monitor

Yardeni isn't ignoring the risks.

Transportation stocks now trade at a record forward price-to-earnings multiple of roughly 24, while higher oil prices could pressure profit margins if fuel costs continue climbing.

Even so, his broader message remains constructive.

While investors debate AI spending, geopolitics and interest rates, one of Wall Street's oldest market indicators continues pointing in the same direction.

According to Dow Theory, the bull market still has confirmation.