AI Stock Boom Mirrors 1920s Electricity Frenzy
In the 1920s, electricity stocks became the darling of the stock market today, mirroring the current AI stock boom. Despite questionable fundamentals, investors were drawn in, much like today's AI frenzy. The Dow Jones Utilities Average soared to 144 in 1929 but crashed to 17 by 1934, highlighting the volatility of the stock market today.
The electricity sector held immense power, with major players using complex structures to sell shares in essentially the same companies under different names. Almost every 1920s megacap owed its success to electrification, akin to today's tech giants in AI. The electrification boom set the stage for a century of U.S. industrial dominance and a global economic revolution.
The boom brought modern movies, new magazines, and evenings spent by the radio, transforming society. However, the stock market's collapse exposed fraud and excess, leading to reforms like the Public Utility Holding Company Act of 1935. It took a decade of turmoil for electricity to become invisible infrastructure. Unlike the 1920s, AI has been developing since the 1950s and is now reshaping every aspect of the economy, with investors pouring money into AI suppliers and companies using AI in new ways.
History repeats itself in the world of technology stocks. The electrification boom of the 1920s and the current AI boom share striking similarities, from stock market volatility to transformative societal impacts. As AI continues to reshape our world, lessons from the past serve as a reminder of the importance of regulation and responsible investment in the stock market today.
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