In February 1893, the Philadelphia and Reading Railroad collapsed under debt, marking the beginning of a major financial crisis for the U.S. railroad industry. Over the next five years, approximately one-third of the national network, covering 60,000 miles of track, fell into receivership, leading to significant investor losses and contributing to the Panic of 1893, which saw industrial production drop by more than 15% from 1892 to 1894.
While railroad companies struggled, others capitalized on their infrastructure, such as Cyrus H.K. Curtis of Ladies’ Home Journal, who reached 1 million in circulation by leveraging railroads for distribution without bearing the hefty costs. This historical context parallels current concerns regarding major AI companies, which face similar financial pressures as they invest billions in infrastructure while dealing with rising costs and declining service prices, potentially squeezing profit margins.
Among these AI companies is Amazon, expected to spend approximately $220 billion on capital expenditures this year, with significant focus on AI. Analysts warn that a collapse similar to the railroad crisis could impact today’s tech giants, while highlighting investment opportunities in companies effectively utilizing AI, such as Bristol-Myers Squibb Co. (BMY), which is applying AI in drug discovery without intending to build AI infrastructure.
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