“All of them led to a jump in private investment of 2% to 4% of GDP. All of them lasted two to four years. All of them ended up with excess capacity. And all of them, interestingly, ended up with a spike in interest rates as everyone was competing for capital in the final stages of the boom. And all of them ended up with a crash. Will this time be different? That's a rhetorical question.”
Prof G Markets · Money & Markets · October 2026
Ahamed is going through the four or five private investment booms in U.S. history: the railroads of the 1870s to 1890s, the 1920s, the dot-com bubble and the mid-2000s housing boom. The question on the table is whether the AI data center buildout follows the same pattern.
Transcript
…But the problem is you add all of their individual decisions up and you end up with an overbuilding boom. Is there a solution to this? Probably not. I mean, I think it's just inherent in the competitive situation that everyone wants to be one of the two or three companies that comes out on top.
Does that essentially mean that whenever a new technology comes along that is transformative, that there will inevitably be a crash at some point?
There have been four or five private investment booms in U.S. history. The 1870s, which, by the way, was actually three mini booms and busts. So there was one in the 1870s, there was another one in the 1880s, and there was another one in the 1890s. So the railroad boom was actually three booms and busts. The 1920s, when private investment jumped by 5% of GDP for a few years. The dot-com bubble of the late 1990s. The real estate bubble of the mid-2000s. All of them led to a jump in private investment of 2% to 4% of GDP. All of them lasted two to four years. All of them ended up with excess capacity. And all of them, interestingly, ended up with a spike in interest rates as everyone was competing for capital in the final stages of the boom. And all of them ended up with a crash. Will this time be different? You know, I'm answering, that's a rhetorical question.
I guess the question then becomes timing. When would it all unfold if we believe that this is just what happens? You have technology booms and then suddenly there's overcapacity and we all look around and we suddenly lose confidence and it crashes. Just looking at what happened during the railroad…
The data center boom has been going, let's say, for two years. We've had booms go on for four years. So we could be halfway through the process. So, you know, there is almost nothing in history that allows you to pinpoint the timing. I can't be any more precise than that. The size of the private…
Why is it that we should be looking at percentage of GDP as a metric for whether we're at the top? Like, what is it about that measurement that makes it relevant and important in terms of predicting crashes?
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