There is so much negativity about AI right now that as a contrarian Im even more bullish on it than before. Having been on the bleeding edge of tech since a teen OG’ing the computer game industry, I’ve seen some transformation technology appear, yet nothing, not multiplayer games, multimedia, the internet, mobile phones, has approached the stunning potential and disruption that AI will bring.
My conclusions on what would happen when AI hit the mainstream are all unrolling but the key one is:
AI will boil the oceans
You can do what you will with that metaphor but if you don’t think the magnitude is about right you are underestimating what comes next.
The foundation issues are.
Artificial Intelligence is an incredibly powerful tool which levers human potential.
There is no second place for the less intelligence
The is not limit of demand for intelligence
Intelligence is Energy + material science
The first three points suggest a geometric demand for all things AI. Point 4 suggest a geometric increase in demand for energy and raw materials.
My summary for that is:
The Hard Commodities that go into AI will become luxuries.
Put another way the price of hard commodities is going way up.
Right now as huge AI infrastructure is breaking ground, it is clear that Copper is about to be in massive undersupply and the price will twist and twitch and at some point go vertical, just as the precious metals have. Energy prices will also go vertical a conclusion just starting to dawn on everyone. AI is going to take all the electricity available to it. This is why Nuclear is suddenly summoned from exile. You simply cant win the AI war without huge amounts of electricity.
However the penny has not yet dropped for many and perhaps most. Its dropped for the US administration but not in Europe. Its dropped in China. There are not many in London listening to Elon Musk telling them AI will take all the energy on earth and in the solar system and more. I don’t think many on this side of the pond is thinking through the implications of Bezos launching server farms into space. This crazy talk is coming from self made billionaires who proved the establishment wrong by being so ahead in technology few believed them. Whats more they landed their dreams, yet many don’t see what they are doing, even if half right will totally turn everything upside down. (In my book at least, for the better)
The gard commodities going into the AI build out are just simply going to be hoovered up.
Copper is next.
Then what?
My focus is on Aluminium and Energy.
Aluminium is plentiful and has large capacity. It will be the first stop to substitute for Copper. Yet it is energy bound. Aluminium doesn’t want to be a metal, it wants to be an oxide and it takes huge quantities of energy to convince it to be a shiny metal.
The question is what comes first. A spike in the price of energy or the price of Aluminium
As Aluminium is so common and energy prices are not yet on the block to go vertical, I hesitate. However the following chart makes me wonder whether it will be long before I start building a position.
If Aluminium can be nearly $4000 a tonne in 2022, it can get back there pretty soon.
I’m staking out Aluminium and I’m staking out energy, because when they start to crank out AI farms and then switch them live, there is going to be a big disruption and its going to drag hard commodities into a maelstrom in which prices are going to get very spicy indeed.