"China is going to win the AI race"

Dear Reader,

I read something in The Economist this week that I want to share with you.

Elon Musk said there is a "good chance" that China wins the AI race.

And Jensen Huang — the CEO of Nvidia — has said the same thing.

His exact words: "China is going to win the AI race."

I want to explain why this argument has real teeth.

And why every investor needs to understand it.

The Limiting Factor Nobody Is Talking About

We've said it on this channel a hundred times.

Every great technology revolution in history is also an energy revolution.

Coal for railroads.

Oil for cars and military.

And now electricity for AI.

The limiting factor for AI deployment is not chips anymore.

It's power.

Jensen Huang put it bluntly recently.

Microsoft is sitting on GPUs it simply cannot plug in because there isn't enough electrical grid capacity to run them.

Think about that.

The most valuable company in the world is sitting on billions of dollars of the most sought-after chips on earth.

And they can't turn them on.

The constraint has shifted from chip supply to energy.

That is a profound change.

Five Reasons China Has the Advantage

First, raw power generation capacity.

China has topped 4 billion kilowatts of installed power generation.

The US has roughly 1,200 gigawatts.

And China is still growing at double-digit rates.

They are crushing us.

Second, solar.

China has 1.1 million megawatts of solar capacity.

We have 238,000.

Nearly four times what we have.

And because China subsidizes its solar manufacturing through the state, their costs are dramatically lower than ours.

Third, permitting speed.

In America, the average data center takes three years to build.

China pumps them out in months.

They built hospitals in a weekend.

They can permit and build AI infrastructure at a pace we simply cannot match with our state-by-state regulatory patchwork.

Fourth, the propaganda angle.

And I want to say this clearly because I think it's important.

If I were China and I wanted to win the AI race, I would have propaganda operations designed specifically to slow down American data center development.

Fake accounts.

Meme farms.

Creating division in local communities over data center construction.

Getting Americans to fight each other over permits while China builds.

That is economic war.

Make no mistake about it.

Fifth — and this one surprised even me — it's not just a permitting problem anymore.

It's a hardware problem.

There are only three companies on Earth that make the heavy-duty gas turbines needed for new natural gas power plants.

Siemens, GE Vernova, and Mitsubishi Power.

Their order books are completely sold out until 2030.

That means even a company with unlimited capital cannot simply buy its way into more electricity today.

Turbine lead times — not chip supply — may actually end up being the real ceiling on US AI power development.

What This Means for Investors

This is exactly why GE Vernova and Constellation Energy have quietly become some of the best performing AI plays of the last couple of years.

Not because they make chips.

Because they make the energy that powers the chips.

We've had both in our model portfolios.

But right now, this is the energy stock of the decade.

The energy infrastructure story is not finished.

It's just getting started.

The Bigger Picture

We started this game up fourteen to nothing.

America had the early lead in AI.

But we're entering the second quarter now.

China has their offense on the field.

And we're fighting each other over permits while they build.

That has to change.

And where do we think America’s best chance of catching up lies? Right here.

Have a wonderful weekend.

I'll see you Monday.

“The Buck Stops Here,”