A century-old warning from radio: Is AI listening?

Kim Sung-jae

The author is a business administration professor at Furman University and the author of “The Story of Tariffs” (2025). 

Investor psychology is remarkably consistent in the face of technological revolutions. In 1895, Italian inventor Guglielmo Marconi successfully transmitted wireless signals, and by 1901 he had ushered in the era of transatlantic wireless communication. The S.O.S. distress signal he commercialized went on to save 705 lives during the sinking of the Titanic in 1912.

The British-based Marconi Wireless Telegraph Company built a global wireless communications network. It also established the American Marconi Company, in which it held a controlling stake, effectively dominating transatlantic and coastal wireless communications in the United States.

Viewing this dominance as a national security concern, President Woodrow Wilson directed General Electric (GE) to acquire the company's U.S. assets. In November 1919, GE reorganized American Marconi and launched the Radio Corporation of America (RCA).

In July 1921, RCA made broadcasting history by delivering the world's first live radio coverage of a heavyweight championship boxing match. The announcer's voice was transmitted in real time through loudspeakers installed across major cities on the U.S. East Coast. When American boxer Jack Dempsey won by knockout in the fourth round, an estimated 300,000 people poured into the streets in celebration.

The next day, department stores were crowded with customers lining up to buy radios. RCA's stock price surged as well. Shares that had traded at around $1.50 in 1921 soared to $25 just a few years later after RCA spearheaded the creation of NBC.

In August 1927, the Federal Reserve cut its benchmark interest rate by 0.5 percent points, unleashing a wave of liquidity into the stock market. RCA, then the leading media and technology stock, climbed to $573 by September 1929—an extraordinary 380-fold increase in just eight years.

The key catalyst behind this spectacular rise was excessive leverage. Investors needed to put up only a 10% margin, borrowing the remaining 90% from brokerage firms to achieve 10-to-1 leverage. From shoe shiners to schoolteachers, Americans from all walks of life flooded into the stock market using borrowed money.

Alarmed by the speculative frenzy, the Federal Reserve began raising interest rates in 1928. When speculation continued unabated, it tightened regulations on margin loans secured by stocks. As banks called in those loans, RCA's share price collapsed to $26. By 1932, it had plunged further to just $2.50.

RCA's trajectory bears a striking resemblance to today's AI-driven semiconductor boom. Nvidia, the market leader in AI chips, traded at roughly $1.50 per share in 2016. As investment in data centers and AI infrastructure accelerated, its stock price at one point approached $240.

Semiconductor stocks in South Korea have likewise enjoyed a remarkable rally. The problem, however, is once again excessive leverage. Just as leveraged speculation fueled the 1929 stock market crash and ultimately contributed to the Great Depression, excessive borrowing by retail investors can amplify market declines and trigger financial instability.

No matter how transformative a technology may be, it cannot rescue investors who place reckless leveraged bets. That is why leverage should be regulated according to investors' risk-management capabilities and financial capacity.