The AI Problem Is Way Bigger Than You Realize

The world is in an allout race for AI

supremacy

and I don't think that it's actually

going the way that many people think it

is. The US and also American companies

themselves have been committing immense

amounts of capital for AI data center

buildouts and to bring semiconductor

manufacturing to the United States. But

the US president just made a move that

makes it clear that he knows that the US

is still missing one critical piece to

be able to come out on top of the AI

race.

>> For years, American businesses have risk

running out of critical minerals during

market disruptions. Today, we're

launching what will be known as Project

Vault to ensure that American businesses

and workers are never harmed by any

shortage. Just as we have long had a

strategic petroleum reserve and a

stockpile of critical minerals for

national defense, we're now creating

this reserve for American industry.

>> Though it may seem that the US's major

competitor in the AI race, China, might

not be throwing as much money at AI.

It might be because they've been quietly

investing their resources a little bit

differently and might have real wealth

that's necessary for them to be able to

actually come out on top. The US

government just announced a project

vault which is a 12 billion strategic

mineral stockpile and this is

highlighting the growing strategic

importance of metals including nickel,

copper, tungsten, silver and gold. But

what's going on here really? And what

does this mean for you and your money?

On the surface, the US looks dominant in

the AI race. Uh the US leads in private

investment with over 100 billion dollars

which is dwarfing any of the efforts

that China has made from an investment

perspective in the private sector. Uh

the US has all of the frontier models

from open AI to anthropic to Google and

their model and then even X AI. Um, the

US also has some top tier compute

capabilities with tens of millions of

the top uh GPU chips and all of the

talent when it comes to AI research and

development is also uh in the US or

typically looking for a way to get

there. But China has understood

something that the West has ignored for

decades. They understood that the next

economic battleground wasn't going to be

one purely with capital markets and

talent alone. But instead, in the late

1980s and 1990s, China made a really

important decision. The Chinese leader

at the time said, "The Middle East has

oil. China has rare earths." Now, at the

time that sounded kind of absurd, like

what are you talking about? Oil is kind

of the new oil at that time. uh it was

very very important for industrial

capacity and being able to grow and and

move uh and become economically

powerful. But what ended up happening

was is China might have understood that

technology was going to be the new

frontier and that technology was going

to need these rare earth minerals that

they already had. electronics, magnets,

optics, batteries, and what's now, uh,

AI hardware, uh, was something that was

going to be dependent upon rare earths.

And whoever controlled not only the

supply of these rare earths, but the

processing of these rare earths would

control the choke point for the next

industry. So, China classified rare

earths as a strategic resource and

backed the entire industry with state

subsidies and accepted some of the

environmental damage that the West

wasn't willing to tolerate. And most

importantly, they built out processing

capacity and not just mines.

>> We're going to have so much rare earth.

It's actually not that rare. Getting it

processed is rare, but there's a lot of

rare earth. There's a lot of earth

around, I can tell you.

>> And the next part of the strategy was to

flood the market with cheap rare earths.

And so that drove the prices of rare

earths down and basically forced some of

the western competitors to actually shut

down because they couldn't compete with

the unit economics of China doing this

at such a massive scale. And now at that

point, China can absorb the market share

of any of these competitors. And then

the prices would later stabilize once

they already had a huge share of the

market of processing these rare

minerals. And now China becomes the

major gatekeeper. So right now, China

controls roughly 70% of global rare

earth mining.

But then on top of that, 90% of rare

earth processing and refining. It's at

the point where even when the US is

mining rare earths in the US, much of

that refining is still going to happen

in China. They're going to send those

rare earths to China for it to get

processed and then it comes back to the

US for use or right, we also know that a

lot of the actual manufacturing of

American goods is done in China as well.

So you send the metal to China and then

they build what you need and then sell

that back to you. So, China doesn't just

control the supply of rare earth.

They've put themselves in a position to

be the entire choke point for the entire

supply chain of a lot of global

manufacturing, especially in the realm

of technology. And all of these rare

earths that China's responsible for

processing are critical for GPUs, data

centers, electric motors, robotics,

autonomous vehicles, even military

systems, and also energy infrastructure.

In other words, in every single aspect

of what's going to be necessary to be

competitive in this race for AI

supremacy

includes the need of rare earths and

China has them on lock. Now, there's

also another piece of this AI race that

China has locked down. While the West

has argued on which energy sources are

safe and clean, China said we'll just

build all of them. And so China

simultaneously is invested in coal,

hydropower, nuclear, solar, wind, and

more. And now they're generating two

times as much energy as the United

States and about five times as much as

India. And if we're paying any

attention, we all know that the biggest

limiter to what a country is going to be

able to do with artificial intelligence

is going to come down to their ability

to generate energy. And as it stands

right now in the United States, this is

already an emergency that the president

has been trying to address

because uh some of these technology

companies are overloading grids and also

driving up the cost of energy for the

average citizens and that's not going to

be sustainable.

>> Doug Bergam, where's Doug? Will you

please drill it a little bit faster?

Well, now we're putting those utilities

to shame because I'm allowing all of

those AI plants that are being built to

build their own electric generating

force. And they're building them like

nobody's ever seen. Now, China has been

able to get out ahead in this energy

generation and rare earth's equation by

being able to think in 30 to 50year

timelines, which is one of the biggest

things about their entire system that

makes it work. Right? If you have a

leader that's not rotating out every 4

to 8 years, then you can have someone

who spends an entire generation uh as a

leader and pushing the direction of the

country. Another thing about the Chinese

economic and political system that has

allowed them to get ahead of this is

that they prioritize industrial capacity

over short-term profits. The US model

for the economy is very ROI driven and

shareholder optimized. the the thing is

that to to build infrastructure a lot of

the times uh companies are having to

fight with local politicians to make

that stuff happen and then for China you

know they have state directed capital

their their governments are investing in

things and you've got 20 to 40year

planning horizons uh and a willingness

for the government to actually absorb

the losses of some of these projects as

they come. infrastructure in China is

seen as national power and not as a

profit center. So this is why China was

able to overbuild their energy capacity

to get out ahead of what's happening

now. And they also have subsidized

technology companies to allow them to

survive uh up until this point to where

now uh they might actually be able to be

profitable and have some staying power.

Hello, how are you?

>> Good. How are you?

>> I'm fantastic. Please.

>> Sorry. No, no problem. So, now the US

has just announced Project Vault, which

is a $12 billion strategic mineral

stockpile, basically to protect against

any spikes in uh rare earth costs due to

the fact that they have counterparties

that might not want to work with them uh

for supplies like China, right? So, so

the US right now is trying to reshore

its manufacturing and in that it's also

using tariffs both as a political tool

and as an economic tool to accomplish

this reshoring. And the thing is is that

uh an increase in a tariff on another

country in the case of rare earth

minerals means that uh well the US would

have to pay more to import these rare

earths. And so if it gets to the points

where they need to ratchet up the

tariffs even further because someone

wants to play ball or whatever else is

going on, then that might hurt industry.

And I think this is a part of what's

happening here is the US is realizing,

well, if we're going to use tariffs as a

tool, we have to also be prepared for

the fact that

um well, that's going to impact our

industries as well. So, we need to get

out ahead of having uh shortages of

certain raw materials that may be

necessary to building uh the data

centers as well as all of the

manufacturing that we want to bring back

to the United States. Now, I'm not a

financial adviser and this is not

financial advice. Please don't take

financial advice from a random guy

walking around the park

talking to a stick. But the United

States seems to be moving towards the

kind of economic model that China has

utilized, right? Where the US is

starting to invest in companies and uh

that's something that we haven't really

seen so blatantly in the past. We just

heard a few weeks ago that the Trump

administration is taking a 10% stake in

the company USA Rare Earth as a part of

a $ 1.6 $6 billion debt and equity

investment package that's aimed at

helping the company develop a domestic

mine and magnet facility. Last year, we

also had the US announce that it's going

to be investing into a few other

companies as well, including taking

equity stakes in MP Materials, Lithium

Americas, and Trilogy Metals.

So the way that I see it, rare earth and

nuclear energy companies are likely to

continue to be the targets that the US

is acquiring or taking stakes in in

order to get back in control of what

needs to happen to win this AI race. But

I don't know, maybe I've completely lost

the plot here. What did I miss? What did

I get wrong? And how could I be looking

at this differently? Let me know in the

comments down below. If you haven't

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to talk everything money and markets.

And until next time, peace.