Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTJohnny Rice, The Motley FoolWed, August 5, 2026 at 8:37 PM GMT+2 4 min readIn 1989, Warren Buffett put $358 million into the preferred stock of an airline called USAir. By the end of 1994, Berkshire Hathaway had written that stake down to $89.5 million, or 25 cents on the dollar.Not the best move by one of the greatest investors of all time. Indeed, Buffett later said that it was "to [his] shame" that he had "participated in this foolishness" by purchasing the airline's shares.Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »OK, that's great, but what does that have to do with artificial intelligence (AI)? I'll tell you.What Buffett's airline disaster teaches usThe debate at the heart of the AI trade, the one largely splitting bulls and bears, is whether AI is truly a revolutionary technology. Will AI fundamentally reshape our world and continue to drive the S&P 500 (SNPINDEX: ^GSPC) higher?While this is certainly an interesting question, I want to propose something that I think a lot of investors miss: The answer can be "yes," and investors can still lose money.This is where the airline industry becomes instructive. How many technologies have been more revolutionary than flight? I would argue very few. And yet, as Buffett put it in his 2007 letter to shareholders: "[I]f a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down."By Buffett's accounting, the industry as a whole had lost money on a net basis over its entire existence, going all the way back to the Wright brothers, the first to take flight. Many of the biggest carriers have either entirely folded -- Pan Am -- or been bought out in a moment of deep financial distress -- Continental.The point is, flying obviously changed the world. It just didn't make much money for the people who financed it. Why?Two primary reasons: One, it is an extremely expensive business, and two, it is more or less a commodity. A ticket from San Francisco to New York is a ticket from San Francisco to New York. While the experience may differ at the margins, the core product -- getting you from point A to point B in the air -- is exactly the same.Why AI might be the new airline industryAdmittedly, I cannot say for certain this will hold true of AI, but the two hallmarks of what Buffett argued made a business "gruesome" look like they apply. First, the scale of investment in AI dwarfs anything we've seen before. And second, there doesn't seem to be a significant difference in model quality between the frontier labs over time.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info