丹·德雷福斯：AI 的下一个瓶颈是铜

Speaker 1 (00:00:00): We've got Dan Dreyfus on the show. He's with Bornite Capital. Dan Dreyfus (00:00:03): We're gonna be measuring human progress by how much electricity we consume. The semiconductor industry, I view that as an industrial or infrastructure company. I mean, it's effectively a factory. We try to figure out where the world is going, and then we try to figure out what we're gonna need to get there. In the next ten minutes, I am gonna try to teach you about critical minerals. Commodities, our incredibly fragile infrastructure here in The US that is going to require trillions and trillions of dollars of investment if we want to achieve our technological objectives, our reshoring, reindustrialization objectives, and our national security and military objectives. But first, a little bit of history. We are at a very significant inflection point right now in US economic growth and what it's going to look like. Really, from the early two thousands until just a few years ago, The US went through effectively what I think was an economic miracle, where we created so much growth, so much market cap, so much value without really having to invest any capital at all. I mean, think of all the companies that were created with no capital. You had Google with the search engine, you had Meta with social media, they bought WhatsApp for $30,000,000,000 with 12 employees, you know, no capital whatsoever. You had the streaming platforms, you had the food delivery platforms, you had Apple Computer, which was capital light, created trillions of market cap. You had software as a service, absolutely no capital required to create all that value. And at the same time we were creating these companies, At the same time we were doing that, we were literally tearing down all of our critical infrastructure and moving it overseas to China. So we were really doubling down on that capital light mentality. Dan Dreyfus (00:02:12): But then it sort of started to come back to bite us, right? We had COVID, we had the Russia Ukraine Conflict, we had the tariffs, now we have the Iranian conflict. And every time we had one of these geopolitical flare ups, inflation spiked like a rocket. You need a telescope to see how high inflation went, and it never came down. And the reason for that is we let our supply chains get way too fragile and way too weak, and there's no resiliency in the supply chains. And now we're at this inflection point where we want to reassure everything that we tore down and move to China. We wanna re industrialize. We have this technological compute revolution that is infinitely more infrastructure intensive than compute was in the last generations. And this is creating this really wild demand shock for infrastructural critical minerals commodities at the same time where there's a supply shock because we just haven't invested in this stuff for so long. Now, there are so many capital cycles going on at the same time. I've never seen this many going on at the same time in my career. We have the aerospace cycle. Boeing and Airbus have a trillion dollars of backlog over the next ten years. Now throw in the space economy, which is going to compete for the exact same materials and backlog that Boeing and Airbus are trying to source. We have the grid. Right? Anytime it gets a little bit cold in Texas, the Texas grid's not connected to the rest of The US grid. Every time it gets a little bit cold, that grid shuts down and they're freezing in the dark. Then we've got here in California, Paradise, California. That power line that caught on fire and killed 300 people. Did you know that that power line was over a 106 years old? There's parts of the grid in this country that are over a 106 years old. And here in California, if half the people buy electric cars or there's robo taxis and we all go and plug them in at 6PM after work and turn up the air conditioning, we're just going to kill the grid. Boom, we're going to kill it. We're all going to be sitting in the dark. Dan Dreyfus (00:04:28): So the grid barely works for what we need it for right now. And we haven't even started talking about the tsunami of demand, electricity demand that AI is going to bring. And there's power generation. We've let China go and build multiples more power generation than what we have here. And this is a trillion dollar plus capital cycle that's probably going to be a trillion dollars every ten years for the next thirty years. Data centers, this is now a trillion dollars per year, per year, all infrastructure, all commodities. Then there's semi fabs. The CPU is making a huge resurgence. CPU intensity is going up like a rocket. And I bet you this number is way too low, $750,000,000,000. I bet you that's going be measured into trillions. And then there's defense. Right? Everybody, you know, Taiwan's turned into a porcupine. Japan's raising their defense budgets. Europe's raising their defense budgets. The US raising their defense budgets. What the similarity is amongst all of these end markets is none of them will work without critical minerals. None of it. None of this can happen. And so here's the problem. Last April, China announced that they were going to cut off exports of some critical materials to The US. Samarium, gandolinium, terbium, dysprosium, lutetium, scandium, yttrium, irbium, silver. Just cut it off. And we're close to a lot of big industrial supply chains. And the cutoff of samarium cobalt magnets, we learned that the Ford Motor Company was within days, literally days of their entire production line shutting down, the whole Ford Motor Company. And same with McDonnell Douglas too, by the way. And this put people in the Department of War, Department of Energy into a panic. And to their credit, they're doing something really aggressive and really important. They are now going around to small resource owners across The US and into Canada. Dan Dreyfus (00:06:41): And they're knocking on the doors of these companies that were left for dead in the last twenty years. And they're saying, here is three pieces of paper. The first piece of paper is an equity check that we're investing into your company so that you can go and start converting your resource into a mine. And then the company says, oh, that's great. Wow, that's a shock. But the problem is I've been waiting on my permit for the last twenty years. Nobody wants to give me a permit. They say, oh, look at the second piece of paper. There's your permit. Go and start building right now. And then they show them a third piece of paper. And then the company says, what's this? And they say, this is an off take agreement, take or pay with the minimum floor price that's going to guarantee you a very high internal rate of return on your project, where you can keep all the upside above the minimum price, but here's a minimum price that you can go out and raise a bunch of capital to get this thing fast tracked and up and running. Now, China has an absolute grip, it's absolute on all of these critical minerals. And it's going to take at least ten years, probably twenty to catch up, but we've got to start somewhere because we just can't have China leaning over us and squeezing our testicles every time that we don't do something that they don't like and say, we're going to cut off your exports, we're going cut off your exports of critical minerals, you guys are going to freeze in the dark. So I give a lot of credit to the administration for doing this. And really, you know, I've done commodities now for twenty five years, and I've never seen something like this happen before. It's truly what I call a vouja day moment, which is the overwhelming feeling that none of this has ever happened before. So here's copper, this is the king of metals, this is just one example. We need copper for everything. Dan Dreyfus (00:08:22): If we want clean energy, solar power per megawatt takes five amounts, five times the amount of copper than a typical base load CCGT gas fired turbine. Same with wind, seven times the copper. Data centers for a one gigawatt AI factory now, you need 50,000 tons of copper per gigawatt. And we're going to start building 15 gigawatts of these things per year, per year. So 50,000 tons per gigawatt and 15 gigawatts is 750,000 tons of copper that we're going eat for these things. Do you know what the copper supply was last year? It grew only 500,000 tons and this is just the data centers. Then electric cars, if we're going have robo taxis everywhere, an electric car consumes five or six times the copper than a traditional internal combustion engine. And then there's the military. In the Ukraine Russia Conflict, did you know that we used more explosives than in all of World War II? Did you know that? The artillery shells of these explosives, guess what they're made of? One of them is called the copperhead, very cleverly named after a poisonous snake. They're all made of copper. Do you think we'd go into the battlefield and recycle that copper? No. That copper is gone. So we need these metals for everything that we do. Now, where are we going to get it? Going back in human history to Mohenjo Daro, we have mined 700,000,000 tons of copper. 700,000,000 tons of copper over the past ten thousand years. Now, 80% of that copper, we could probably get it all back if we wanted. But what we'd have to do is we'd have to tear down this building, we'd have to rip up the grid, we'd to tear down the buildings in Europe, in Japan, in China, and we could get all that copper back, sure. Then we'd be doing this conference in a tent. So how are we going to get it? Well, right now, demand is 30,000,000 tons per year. About 4,000,000 of that supply comes from recycled copper, the rest of it is 26,000,000 tons is mined. And if we just grow in line with GDP, so forgetting about data center upside, forgetting about green energy, solar upside, just growing at GDP like we used to. Now listen carefully, that means over the next eighteen years, we're going to need 700,000,000 tons of copper. Over the next eighteen years, we're going to need as much copper as we mined in the last ten thousand years. Dan Dreyfus (00:10:54): That means we're going to need five world class mega tier one minds coming online every single year. And you can go and grok this or chat GPT this, you can count on one hand and have some fingers left over the number of tier one minds that are coming on between now and the end of the decade. So I don't know what they're going to do because it takes seven to twelve years to build a copper mine. The existing copper mines are dying. The big mines in Chile are over a 100 years old, the grades are depleting. And this is going to be a major, major challenge in an upcoming bottleneck. Right? Today, all the rage is in memory, in HBM, in NAND, prices are going vertical because that's the bottleneck. Now, you want to look around the corner and see the next bottleneck coming, I strongly urge you to look at copper. And so, here we are, a supply shock meets a demand shock, commodity cycles typically last fifteen years and have multiple 100% of upside. We're only a few years into this. This is just really getting started. And I want to say one more thing, right? We spoke about demand. We're having this demand shock. We spoke about supply, but what we haven't spoken about is how we're destroying the value of the US dollar. Since COVID, we have absolutely destroyed the value of our fiat currencies. Today, have $40,000,000,000,000 of government debt that's growing at 2 and a half trillion dollars every year. On top of that, we have a $100,000,000,000,000 of discounted present value of the future social liabilities. So Medicare, Medicaid, social security, pensions, that's also growing by 2 and a half trillion dollars a year. So you have 2 and a half trillion of growth on the federal debt, 2 and a half trillion dollars of growth on the social liabilities. The US government only has 5 and a half trillion dollars of tax receipts every year. So And what's going to happen the next time we have a recession where tax receipts go down and spending has to go up? We're going to print giga dollars. And in the nineteen seventies, we had this problem as well. Dan Dreyfus (00:12:57): And the way we did it is we just debased currency through some inflation, through some growth, the currency lost 70% of its purchasing power. And commodities and hard assets and infrastructure will protect your purchasing power in that kind of environment. Go and look it up in the nineteen seventies, what was the best performing asset class by a mile? That's your homework. So, with that, thank you and look forward to chatting with you guys. Shabbat, I Jason Calacanis (00:13:26): think on the prediction show, was you your call, I forget which category it was, but you definitely had Chamath Palihapitiya (00:13:34): I thought the best performing asset was gonna be copper. And that's before I talked to Dan. Dan Dreyfus (00:13:39): That's right. Chamath Palihapitiya (00:13:39): Which is saying something. Dan Dreyfus (00:13:40): Well, know, I think the copper price is easily gonna double from here. I mean, I've seen molybdenum go from a dollar a pound to $33 a pound. So a double is no big deal. Chamath Palihapitiya (00:13:51): So Take step back. You said something really interesting backstage, which is if you look at everything that we're doing right now, we're barely going to keep up with just the natural energy demands of humanity, right? Just explain that thesis the way that you framed it in the back. Dan Dreyfus (00:14:10): So here's the issue. We have not invested in upgrading and modernizing and hardening the electric grid since post World War II. We just let it go. The last two, three, four administrations were sleepwalking and haven't done anything to harden this infrastructure. Now, if we simply just want to achieve our objectives to re industrialize, re shore, electrify, when I say electrify, just means replacing your old gas boilers in these buildings with heat pumps, which every commercial building is doing. It means, electric car penetration going up. It means using your electronic devices more, not even talking about AI, not even talking about AI. We're going to have shortfalls just from that. Chamath Palihapitiya (00:14:59): Just from living our life. Just from living Dan Dreyfus (00:15:01): our lives. So what happens? Blackouts, brownouts? Blackouts, brownouts, and we're going to have to Rising electricity prices. Rising electricity prices. But you brought up a really great point, I thought on one of your shows where you were talking about how the utilities are just really goosing up the cost to do everything so that they can report to their regulator and earn ROE on the higher capital base. What's really interesting, I think is really underappreciated is that's where all the inflation is coming from. It's from the transmission and distribution from the utility because power prices over the last twenty years, even after the rise we've just had, power prices are still down. They're definitely down in real terms, but they haven't really gone up much in absolute terms. And so when you're talking about power going up, it is still cheap. But it's getting more expensive. Chamath Palihapitiya (00:15:52): Getting it to is really Dan Dreyfus (00:15:54): Getting it to people because you know, the labor, the labor by far and away is the biggest bottleneck. Craft labor, right? What do we tell all our kids to do, you know, in the last ten or fifteen years? They've a of standards for you to become a covert. Jason Calacanis (00:16:05): Yeah. Right. Big mistake. And so, I'm curious from the audience, in your homes, how many people have put up solar and or power walls? How many people have actually done that? So, that's about half the crowd. How many people, second question, are planning to do that in the next year or two? Okay, so that's another 20%. So it's pretty obvious, this is obviously a fluent crowd. They are routing around the grid is the solution to this energy independence in the Chamath Palihapitiya (00:16:39): Great question. Jason Calacanis (00:16:40): The home in the business businesses are not waiting for the government. So maybe the grid is gonna be like this weird archaic infrastructure and it's just going to be a ground up solution. Dan Dreyfus (00:16:52): Well, you're going to need the grid no matter what for industrial use. I mean, that's the foundation of industrial use. I mean, the scale of what we have to do just for industrial, here's a good step for you. So a one gigawatt AI factory, if you wanted to do all solar, right? And I'm a big solar bull, okay? If you want to do all solar because solar's capacity factor is 20% because the sun doesn't shine all the time, with a capacity factor at 20%, a one gigawatt data center needs five gigawatts of solar. Each gigawatt of solar takes up 7,000 acres. So at five gigawatts, that's 35,000 acres. That's bigger than San Francisco. So where are you going to find the people? You know, where are going to find that's the biggest bottleneck we have by the way is craft labor. David Friedberg (00:17:33): Yeah. What about generally scarcity breeds innovation? There's been a conversation or I've seen some startups that are talking about new technology and mining to access. I think traditionally rare earth is kind of the pitch, but everything we need is in the earth below us. It's just that we only mine the stuff that's on the surface is the general thesis. Is there a set of innovations that you think are coming to market that are going to ultimately unleash more productivity than we see as because we're still using the same technology we did a hundred years ago to get this stuff out of the ground. Dan Dreyfus (00:18:07): For some commodities, yes. You brought up rare earths. So coming out of the fourteenth century, there were these guys called alchemists. Remember then they said they could turn lead into gold. And back then the periodic table was just four elements. There was water, there was fire, there was air, and there was earth. Now fire, you could figure out what it was. The air was pretty pure, the water was pure, but every time they saw something in the earth they didn't know what it was, they called it a rare earth. And so rare earths are everywhere and the technology to extract rare earths is going to allow us to have a huge abundance of them, but the problem is processing them. That's the problem. The Chinese have all the technological know how to convert what you take out of the ground and convert it into something that we can use. And so there's always going to be some element of conversion that you're going to need. With something like copper, the market is so big that it's really difficult to find a technology that could solve that problem overnight. Jason Calacanis (00:19:09): And if we are having just thread, a couple of topics we've been talking about on the pod incessantly about, if we do have this rivalry with China and they are the provider, and that's the brittle part of the supply chain, We can solve the problem of job displacement, not apocalypse displacement. People in America who want jobs, these are going to be incredibly high paying jobs. And we can start bringing the fabs from Taiwan here, which we're doing. And we're going to bring both to North America and I understand South America from a friend of mine who's got an automated mining system, Adams, Travis, we're going to be able to just create a large number of jobs here. So maybe you could talk a little bit about what impact we keep talking about how behind America is, but what happens to China if we stop buying? Here. If we start Dan Dreyfus (00:20:10): building. What you said is very important for this whole jobs debate. The craft labor that we're going to need is going to be almost limitless for what we have to build. And there's really no other way around it, right? In many ways, like look what happened in the 2000s, right? We tore down all our factories and moved them to China And who got killed by that? It was the blue collar craft labor, created all kinds of unintended consequences, fentanyl, wealth gaps. Pennsylvania, The coasts were making all the money in the heart of the country, the salt of the earth was getting killed. What's ironic today is that same part of the middle country, those people that got displaced are now getting entry level salaries. If you go to Kwana University and you're top of your class, you're starting out at $150 right out of high school. And the jobs that they're doing ironically are the jobs that may or may not be displacing some of the early lower level white collar labor. And so the tables have totally turned. And so look, it's an efficient market. The jobs are going to flow where the money is and the money right now is really coming into Chamath Palihapitiya (00:21:28): Can this we talk about a couple of other areas? What's your take on other forms of energy, not gas, coal, nuclear, hydrocarbons? I mean, the demand pull seems like if just based on this, maybe the most reductive takeaway is everything. But then how do you, Dan, differentiate? Like why were you Why did you say, for example, you're super bullish solar? What are your thoughts on nuclear? How do you trade all these off, these different sources of energy? Dan Dreyfus (00:21:57): So we're swimming in natural gas in this country. We can build solar, that's not the bottleneck. And nuclear, we can't really build it. We can't even build the containment vessels in this country. The Koreans can do it, but we can't do that here. So there's always going to be these big bottlenecks system, you're talking about solar, whether you're talking about nat gas, whether you're talking about uranium, we're going to have the raw inputs like the natural gas that we drill from the ground, but what we're going to be short of is the critical minerals to build the nuclear power plants. We're going to be short the silver, for example, to build these solar panels, especially if we start launching data centers in space. These are going to consume incredible amounts of silver. Right now, the silver supply demand dynamic is we consume a billion two ounces a year, we supply a billion ounces a year. So, it's a 200,000,000 ton deficit per year and we only have 600,000,000 of above ground inventory left. So the clock's ticking. We got three years left guys before we just stock out. Then the solar story is where do you get the silver for the photovoltaic cells? Jason Calacanis (00:23:01): So for our kids and for the country, generation tool belt for us allocating, get some exposure to copper, silver minerals. And then there's a bunch of service providers in and around that area that we should be investigating over the next year. Don't forget the labor, Dan Dreyfus (00:23:17): the service providers. That's a big one. Chamath Palihapitiya (00:23:19): Okay. How do you allocate capital? You're at the front end of owning what, mines in production, but then also the end use cases. Like how do you decide where to not play? Because a lot of these things, it looks like these are incredible end markets, but you can get run over. Like if you're in the wrong part of the market, there's supply shocks, there's supply shaping by China, there's price dumping. It can be all obvious and you could lose a lot of money too. Dan Dreyfus (00:23:44): Yeah, look, you really have to understand supply chains. I think to a lot of people out there, supply chains are this sort of weird mystical concept. And I still think a lot of urban Americans still think a ham sandwich comes from the refrigerator and they don't think about the 30,000,000 pigs every month they're getting slaughtered outside of Chicago. Jason Calacanis (00:24:01): Don't get framework started. But Dan Dreyfus (00:24:03): you got to understand where the pinch points are in the supply chain, number one. And number two, I think you have to really make sure that you're not going to get technologically disrupted where you can find, I think this was to Friedberg's point where you can find something that's going to replace that tightness in the supply chain. Jason Calacanis (00:24:19): Give it up for Dan. Well done. Very, very informative.