AI’s Biggest Challenge

It’s Probably Not What You Think [The Daily Reckoning] June 20, 2024 [WEBSITE]( | [UNSUBSCRIBE]( AI’s Biggest Challenge Annapolis, Maryland [Brian Maher] BRIAN MAHER Dear Reader, Artificial Intelligence investors will soon dangle from the hooks of a fantastic dilemma. Today we show you why. Artificial intelligence has worked Wall Street into a state of high incandescence. It represents the next “big thing.” And dizzied investors — fearful of “missing out” — are piling into it. Consider for example Nvidia — AI’s primary wagon-puller. The thing accounts for over one-third of 2024’s stock market jumps. What then is the fantastic dilemma to which we refer? It is this: Artificial intelligence wars against the climate fanaticism presently amok in elite circles. That is because artificial intelligence is a gluttonous devourer of energy. It demands electrical power in quantities truly prodigious. The movement of air — wind power — is inadequate to needs. The harvesting of solar emissions is likewise inadequate to needs. The wind does not always blow and the sun does not always glow. They simply cannot satisfy artificial intelligence’s extravagant appetites. Reports Digiday: Over the last few months, it’s been widely chronicled that generative AI already requires massive amounts of energy to run, leading the International Energy Agency to recently project that global data center electricity demand will more than double by 2026, including in the U.S. Electrical demand will double and then some — within two years! Whence will the electrical supply spring? Not from windmills. Not from rectangular receptacles and converters of solar radiation. More: This realization directly counters the efforts media agencies have made in recent years to reduce carbon emissions for themselves, their clients and even the media companies whose ad time and space they buy. How can they sink the irreconcilable differences? We do not believe they can. You can expand the capacities of artificial intelligence. You can alternatively “go green.” Yet you cannot do both. Not at once. Reports The Hill: As of this writing, wind and solar account for only 14% of the total energy consumed in the U.S. In their present form, wind and solar simply cannot come close to providing enough energy to meet current energy demand, let alone the huge increase that is sure to come when AI data centers begin taking their toll on the nation’s power grid. Even BlackRock’s Chief Executive Officer Larry Fink — himself a bugler for wind and solar energy — knows it: These AI data centers are going to require more power than anything we could ever have imagined. We at the G7 do not have enough power. The sole solution — which is not the solar solution — reduces to two energy givers. The first is fossil fuels, so-called. If it is artificial intelligence you seek, it is fossil fuel expansion you must seek. The second energy is nuclear energy. Yet nuclear energy is a hellish bugaboo to many environmental zealots. And global governance is heavily against these energies. They are instead for wind and solar energies — the inadequate energies. Once again, The Hill: The largest obstacle to the rise of AI is the misguided energy policy that governments across the West have embarked upon in recent decades. The march toward net-zero carbon dioxide emissions and the insistence that we replace fossil fuel-based energy sources with so-called renewable energy sources like wind and solar poses the largest threat to an AI-based future. In other words, the massive, ill-advised push by climate alarmists to transition almost overnight from reliable and affordable energy sources such as oil, natural gas and coal to not-ready-for-primetime green energy is incompatible with the huge amount of energy that AI will require in the decades to come… What’s more, wind and solar can provide energy only intermittently, meaning they can provide power only when the wind is blowing and the sun is shining. AI data centers require a constant flow of energy. They cannot be shut down when it’s cloudy or calm. Returning to nuclear power: We should reconsider nuclear power as a steady source of baseload energy. “Nuclear power is the most reliable energy source, and it’s not even close,” the U.S. Department of Energy states. Nuclear power is also far more environmentally friendly than wind or solar. “Wind farms require up to 360 times as much land area to produce the same amount of electricity as a nuclear energy facility… Solar photovoltaic facilities require up to 75 times the land area,” reports the Nuclear Energy Institute. Who then is the authentic environmentalist? The wind and solar demoniac — or the atomic champion? In our telling it is the atomic champion. Thus the wind and solar demoniacs… including those on Wall Street… are squeezed within a pickle jar. They must choose between artificial intelligence and their ideological fascinations — from which many profit. Which will they select? Below, income guru Zach Scheidt shows you the superior method of investing in artificial intelligence. That is the safe, non-maniacal — yet lucrative — “pick and shovel” strategy. What is that? And why is it so promising? Read on… Regards, [Brian Maher] Brian Maher Managing Editor, The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Editor’s note: Between now and June 25 — under a week from today — AI expert James Altucher says new [“AI 2.0” will open a brief “Wealth Window.”]( James believes it’s a prime opportunity for regular Americans to get in on the [$15,700,000,000,000 AI boom.]( If you missed out on crypto, James says AI 2.0 will be 10X bigger. Some Americans will change their fortunes forever with his three AI wealth-building strategies. [Go here to learn more.]( [You have (1) item on hold at our warehouse:]( Item #: [51987]( Status: On hold Value: Approx. $300 Claim by date: 06/21 Our Head of Customer Experience will show you what you need to do. [Click Here Now]( The Daily Reckoning Presents: The “pick and shovel” approach to AI investing… ****************************** Profit From the 21st-Century “Gold Rush” By Zach Scheidt [Zach Scheidt] ZACH SCHEIDT “What single word would you use to describe today’s AI investment plays?” The question was posed to me as I sat in on a panel discussion with Jim Rickards, Byron King, Dan Amoss and a few other influential minds in the investment community at the famous (or infamous) Watergate Hotel in Washington, the heart of the swamp. As I’m sure you know, artificial intelligence (AI) has captured the attention of Wall Street and Main Street alike. Optimistic investors have driven shares of stocks tied to the AI trend sky-high (hello, Nvidia!). And the euphoria is starting to resemble the levels of optimism surrounding the “dot-com” bubble which was at its peak when I started my investment career as a hedge fund manager at the beginning of this century. Quite frankly, I’m concerned. Of course, there are some great use cases for artificial intelligence. The technology can be used to advance medical science, improving longevity and quality of life for patients. Advances in AI can also help people better communicate around the world, overcoming language barriers. Companies are improving efficiency, reducing waste and freeing up people to focus on more important tasks and conceptual ideas. It seems like every day there’s a new use case developed for this amazing technology. Yet many wise minds have been warning about the dangers of AI as it becomes more powerful and autonomous. These warnings are moving from the purely theoretical sphere, where they’ve been for decades, to the real world due to the pace of AI advances. The classic question of what happens when the machines are smarter than humans has become a legitimate concern for society. And while the science of large language models and autonomous computing is outside of my area of expertise, I have my own concerns when it comes to AI investments. The word I used in the panel discussion was “bifurcation” — because there truly are two sides to the AI investment ledger. On one hand, you have a large number of AI stocks that have traded sharply higher thanks almost entirely to investor optimism. Many of these stocks have no business trading at the price points they’re at, or at the valuations Wall Street has given these companies. Again, think dot-com stocks in the late ’90s. I’m concerned with the losses that unsuspecting individuals may suffer — in the same way investors were punished in late 2000 and 2001 as the dot-com bubble burst in spectacular fashion. But at the same time, I’m hopeful about the gains that wiser investors can capture from this trend by investing in legitimate companies that are truly generating profits from the advances in AI technology. My focus is on income investments. Today, I want to introduce you to an income play that directly benefits from AI but at the same time allows you to sleep at night knowing that your investment is safe — and not subject to the wild swings that will surely characterize the AI stock market over the next several years. I’m talking about “pick and shovel” plays in the AI market. What do I mean by pick and shovel plays? It goes back to the great Gold Rush of the late 1840s. [Florida Man Wields Odd Device on Virginia Farm]( [click here for more]( He traveled 1,000 miles away from home… To show you this strange device on a farm in rural Virginia. You won’t know by looking at it, but a secret company behind this strange device could hold the potential to make you rich over the coming years. [Click Here To Find Out How]( It’s been well documented that the real winners of the 1849 Gold Rush were the outfitters that sold “picks and shovels” to gold speculators. Regardless of whether these miners struck gold or not, the general stores, feedstock providers and other supporting businesses made out like bandits. That concept has been revisited over and over in different areas of the economy and financial markets. Whenever there is a manic or speculative development (like the dot-com bubble, the housing euphoria of 2007 or today’s AI enthusiasm), there are certain companies that generate reliable profits serving a growing industry that may be considered speculative at best. When it comes to AI, electricity has become one of the most important resources to drive this technology forward. It takes a tremendous amount of power to run the servers that process unbelievable amounts of data. And on top of that energy, it also takes a tremendous amount of electricity to cool the AI data centers so the computer equipment doesn’t overheat and melt down. As more data centers are built, demand for power continues to grow. In fact, industry analysts now project that electricity demand from data centers may grow by an annual pace of 13–15% through 2030. So by the end of the decade, data centers are projected to account for a whopping 7.5% of total U.S. electricity consumption. That’s obviously very good news for the utility companies that provide power for these data centers. Demand for the company’s electricity is growing, and that demand should continue to increase over the next several years. Meanwhile, the valuation that Wall Street places on utility stocks should also increase over the next year. You see, right now, interest rates are relatively high compared to what we have seen over the past two decades. As you know, the Federal Reserve has hiked rates in an attempt to slow the economy down and reduce inflation. Higher interest rates can be a drag on dividend payers like consumer staples and utility stocks. That’s because when interest rates are high, income investors have other alternatives for generating much-needed cash flow. So capital that might have otherwise gone into dividend stocks is instead invested in bonds and other interest rate-sensitive assets. But as we head into the second half of this year — and further into 2025, the likelihood of the Fed cutting rates is picking up. The Fed’s practically said it’ll be cutting rates. And that shifting dynamic is very favorable for utilities, especially those utilities stocks that pay dividends. Once interest rates start to fall, that incentive to move capital away from dividend stocks will begin to reverse. And as more investors move capital out of bonds and other fixed-income products, and into dividend stocks, we should see prices for utilities move higher. So there’s both a fundamental and a technical argument for owning quality utilities in today’s market, giving you a great chance to lock in a solid stream of income with the promise of investment gains as interest rates come back down. The bottom line is select utilities should have much further to run as AI continues to drive demand for electricity. Want to capitalize on the 21st-century gold rush? You might want to consider investing in top utilities. Regards, Zach Scheidt for The Daily Reckoning [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) Ed. note: Between now and June 25 — under a week from today — AI expert James Altucher says new [“AI 2.0” will open a brief “Wealth Window.”]( James believes it’s a prime opportunity for regular Americans to get in on the [$15,700,000,000,000 AI boom.]( If you missed out on crypto, James says AI 2.0 will be 10X bigger. Some Americans will change their fortunes forever with his three AI wealth-building strategies. [Go here to learn more.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:feedback@dailyreckoning.com) [Brian Maher] [Brian Maher]( is the Daily Reckoning's Managing Editor. Before signing on to Agora Financial, he was an independent researcher and writer who covered economics, politics and international affairs. His work has appeared in the Asia Times and other news outlets around the world. He holds a Master's degree in Defense & Strategic Studies. --------------------------------------------------------------- [Zach Scheidt] [Zach Scheidt]( is the editor of Lifetime Income Report and Income on Demand — investment advisories dedicated to finding Wall Street's best yields. He brings to the table impeccable investment management experience and a solid record of identifying oversized payout opportunities. 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