The 80-year-old lessons of tech investment mania and inflated profits
The collapse of Leasco offers a warning that inflated earnings, expensive acquisitions and rapid technological change could imperil today’s AI investment boom.
Nvidia CEO Jensen Huang introduces the Vera Rubin GPU during his first keynote speech at Computex 2026 in Taipei on June 1.AFP/YONHAP
Kim Sung-jae
The author is a business administration professor at Furman University and the author of “The Story of Tariffs” (2025).
In February 1969, shareholders of the fledgling company Leasco gathered at Chase Manhattan Bank in New York. When its 29-year-old CEO, Saul Steinberg, announced plans to acquire Chemical Bank, America's sixth-largest bank by assets, the room erupted.
The announcement stunned Wall Street. Chemical Bank, which would eventually become part of JPMorgan Chase, was a 140-year-old institution representing conservative finance. Leasco was merely a computer leasing company founded by an unknown young entrepreneur.
Months earlier, Steinberg had acquired Reliance Insurance, the United States' 25th-largest property insurer, through hostile takeover tactics and stock swaps. The insurer's revenue was 15 times Leasco's.
Inflated valuations made the acquisition possible. After Leasco went public at $5 per share in 1965, its stock surged sixtyfold within several years.
Steinberg inflated profits by extending the useful lives of popular IBM computers. IBM, which dominated the market, leased computers at high prices while assigning them four-year useful lives. By doubling their depreciation periods, Steinberg reduced reported expenses, boosted accounting profits and drove up Leasco's share price.
When Steinberg targeted Chemical Bank using similar tactics, Wall Street's establishment retaliated. Financial institutions blacklisted Leasco, halted additional lending and encouraged bank trust departments and institutional investors to dump its shares.
Leasco's stock plunged by two-thirds within weeks. But Wall Street's offensive was not the only cause. The following year, IBM introduced cheaper, more efficient computers, rendering older machines virtually worthless.
Federal Reserve tightening compounded the pressure. As inflation exceeded 3 percent, the Fed raised its benchmark interest rate from 4.5 percent in early 1968 to 10.5 percent by June 1969, restraining technology-driven stock speculation.
The pattern of soaring technology stocks, surging investment and subsequent commoditization is repeating today.
Nvidia's graphics processing units command premium prices amid supply dominance reminiscent of IBM's computers. Corporate acquisitions fueled by astronomical market valuations are also flourishing.
Yet continued technological advances will eventually commoditize AI semiconductors and computing capacity. As supply bottlenecks disappear, the indiscriminate investment bubble they encouraged could burst.
That makes investor Michael Burry's warning difficult to dismiss. He argues that the AI investment bubble, sustained partly by extending depreciation periods to disguise the costs of trillions of dollars in capital expenditures, may be approaching collapse.
The historical lesson is not that technological innovation lacks value, but that inflated earnings and excessive investment can turn genuine breakthroughs into financial disasters.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
