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Read original →Has AI Shrugged?
Data center investments surged to $455 billion in 2024. An analysis of parallels between the railway boom of 1873 and today's AI infrastructure: why financial crises don't halt technological progress and who controls the future.
AI summary
The article draws a parallel between the railway boom of the 19th century and the current AI infrastructure boom. The Panic of 1873 did not halt the development of railroads, as the problem was with financing rather than technology. Today, investments in data centers are growing at explosive rates, but the question remains: are we building infrastructure faster than an economy capable of justifying it is emerging.
1873: A Financial Glitch, Not a Flawed Idea
The Panic of 1873 made it into textbooks as the collapse of a railroad bubble. In reality, it was a breakdown in the financing mechanism, not in the transportation concept itself. The failure of investment bank Jay Cooke & Company, overleveraged with Northern Pacific bonds, coincided with a shift in monetary regime— Coinage Act 1873, which removed silver from circulation, draining liquidity and triggering a cascade of debt defaults.
Yet looking at FRED statistics on total U.S. railroad mileage, the picture is clear: within just a few years after the panic, construction returned to its previous pace, and by 1890 the network reached approximately 200 thousand miles. Cross-referencing with data from John Stover's American Railroads shows growth from ~93 thousand miles in 1880 to ~163 thousand in 1890—meaning the financial "timeout" didn't alter the network's trajectory.
Data Centers as the New Rails
Today we're laying lines again – only not across prairies, but through the clouds. Server farms, power lines, undersea cables – this is the new track. According to Dell'Oro Group, global data center investment surged 51% in 2024, reaching $455 billion. And according to NVIDIA Investor Relations, data center revenues exceeded $115 billion – a figure that looks more like a mid-sized country's GDP.
But can we unequivocally call this a sign of maturity? Or are we witnessing a 21st-century "railway mania" phase, where infrastructure is being built faster than the economy that would justify it can emerge? So far, there are no answers. We're at a stage where even excess capacity doesn't look like a mistake, because it creates opportunity for something not yet invented.