Transcription
Good morning. This is Dylan Jovine with Behind the Markets. Happy Wednesday.
Today is Wednesday, July 1st. Welcome to July. We've made it to another July together.
Today, I'd like to talk about recent news that China has released a model, a free model, basically, open-source model that is apparently as good as Anthropic's advanced Mythos, which you might remember 2 months ago was released, caused quite a stir because basically it was able to unmask security flaws across all types of things, banking, insurance applications, energy, nuclear power plants. Basically, that model could basically look in any application and find the flaws in the code, basically handing a gift to hackers, all those lovely international hackers. Well, China has an open-source model that basically has caught up to that.
So, it really puts it in sharp relief that this is a national security race. And to illustrate how important that now is to us as a country, even more than investors, believe me. I go broke easily tomorrow, give all the money away just to make America great for another 250 years for my kids and my grandkids. That wouldn't even be a hard decision, actually. That would be an easy decision. I just walk around like a monk, like Caine from Kung Fu.
Um anyway, the country that grabs the technology lead basically has a big advantage. I mean, look at what we did after the Industrial Revolution. I mean, we grabbed that lead and it compounds really over time and it puts you in an unassailable position. So, remember, AI, you can't consider our competitive position vis-à-vis China without thinking of the five-layer stack, the AI stack. Think of it like a five-layer cake.
You have one, chips, you know, GPUs, CPUs, Nvidia, Intel, ARM, all those guys. You have infrastructure, of course, data centers, AI factory, the physical backbone of all this stuff. You have the models themselves, Claude, you know, Anthropic. You have ChatGPT, you have Grok, you have Google's Gemini, etc. And at the top, you have the application layer, which is what we're seeing more and more now. Remember when these AI models came out, when ChatGPT came out, it's a website. You go to the website, you type something in, and then oh, this is cool. It's a novelty. I actually see the benefit of it. It's giving me fantastic real-time answers. It's making me not have to dig through those links and search and all that kind of stuff. Well, the application layer is where we're moving to now, like agents and things like that that can make these models dance for us in very, very different ways.
But remember, at the bottom of that, the big layer here, the foundation layer, is energy. Remember, okay? That's the bottom layer, the foundation layer, number five, energy. Because never forget, every great technology revolution in history is also an energy revolution. And think of, you know, coal for railroads, gas for cars. I mean, it's no coincidence that Rockefeller became the richest guy in the world right as automobiles were taking off, period. He was the richest guy anyway, even when they were just little lamps, kerosene lamps.
So, I actually think, as I study this, we've been asking ourselves, everybody I know is pitching nuclear reactors, nuclear reactors, nuclear reactors. Oh my god, that's the solution. But that really hasn't gotten off the ground, and the cost is insane for clean energy. It's insane, really. So, I've been asking myself, it feels like everybody's looking in the wrong direction for clean energy for AI to really get this stack, for a reliable energy source that is also clean. Everybody seems to be looking in the wrong direction. They're looking at the expensive, glittery model. They're not looking at the best model or solution for energy.
And we just put out our report, you might have seen us talking about it, certainly letting you guys know about it, on what we think is really the dark horse here and is definitely starting to really last in the conversation, but is really pulling up and that is geothermal energy. And I'd like to talk about this for a minute today. This offers several very compelling advantages. And just to organize my thoughts, I wrote some notes here.
First of all, this is low emissions. It's clean energy. What is geothermal? It is energy from the ground, from the heat at the center of the earth, pulling that out and using it to power things, basically. And guess what? There is a lot of it. Ha. Basically limitless geothermal. It's the heat from the center of the earth. That is limitless energy. So, basically it's low emissions, far fewer CO2 emissions than fossil fuels. Basically, a small fraction of the emissions of CO2 emitted by coal or natural gas plants, basically. And it's a basically a modern more modern versions of geothermal energy plants can basically have zero emissions, you know, they're kind of closed loops. Goes up from the ground into the plant and down. So, it's a closed loop system.
Also, reliable base load power, number two. Reliable. It's reliable. It's consistent. It's constant. Heat from the center of the earth. It doesn't matter if it's about the sun, it's not about the rain, it's not about anything, wind, any of that other stuff. It's very, very reliable. It has a small land footprint. It doesn't take a lot of space, small surface area when compared to solar farms, I mean, or wind installations producing kind of equivalent power. And also, key key key, long operational lifespan. I have specific numbers on that. And low running costs. Basically, the big headache of the upfront drilling cost, which are not even big when you compare them to nuclear as I will do in a minute. But, you know, look, after that, geothermal plants have low operating costs. It's amazing. They can run for decades. So, again, remember, the fuel, which is the underground heat, the fuel, it's free, and it doesn't fluctuate in price like oil or gas, okay? It's unbelievable. It's a great thing. And you know, there's a lot of versatility beyond electricity. It could be used directly for heating buildings, greenhouses, aquaculture, industrial processes, all these other things.
So, I have the cost breakdown here cuz I was debating this with somebody a few months back. Somebody was pitching me to invest in a company both a a mine, a lithium mine, and a nuclear reactor, and basically trying to fight a two-front war, which I thought was very challenging economic thing to do. Anyway, I I talked to him about geothermal. I went, "What about geothermal?" And he says, "Nah, nah, nah, nah, nuclear is the way to go." And at the time, I was like, "Okay, you know, he's the CEO of the company. I don't want to embarrass him." But here's what I should have said to him, "Look, when you look at the math, the math tells a bit of a different story."
So, a good geothermal site runs $4 to $5,000 per kilowatt, which is cheaper than a real-world nuclear build, which is basically we're talking about $8,000 kilowatt. And per project, we're talking about a totally different scale of a bet. A 50-MW geothermal plant costs about $200 million, and it can be staged in increments, which businesses love. You can just invest pieces as it gets better. But a single nuclear reactor, again, these are just insane. They cost $14 billion dollars and lock you in for 7 to 10 years. It's kind of an all or nothing bet. Vogt tool or whatever ran two times over budget and it was late. So, geothermal is cheaper to start and lower operating costs over time. I don't really understand why this is even a thing.
So, I think everybody's looking in the wrong AI energy stocks for us to win this stock for us to win this battle. Geothermal is the place to be in my view in our view, which is why we just published a research report on this that I would love you to read. And, you know, when you think of the energy secretary, we have an energy secretary named Chris Wright. Trump administration recruited him. And, he is about as deeply tied to the geothermal industry as any energy secretary could be both financially and ideologically. He was the former CEO of Liberty Energy. Made big investments in geothermal. Saw how that worked first hand. Used it himself. I mean, the guy's a believer, right? Even has his own kind of MAGA kind of knockoff. Make America Geothermal. I don't think he adds again, but make America Geothermal. Okay, MAGO, you know.
So, I actually think, which is why we put out this report, that most people have been talking about nuclear and it's going to be this and it's going to be that. But, boy oh boy oh boy, every time they talk about nuclear, all these permits seem to get stuck in the mud. The cost spiral. I don't know what it is, but those things just don't really get me going. I'm you know, I haven't seen the follow through. A lot of great talk, a lot of great up front. It's certainly the stocks have just done fabulous. It makes you wonder when you have just such a better solution here, it makes you wonder how much hype is really built into that nuclear argument because I don't think the juice is worth the squeeze when it comes to that. I think geothermal is it's clean, it's reliable, it's cheaper, we get it. I mean, it's unlimited. You don't have to deal with oil prices. I mean, you know, what do you want? I'm not really sure I understand.
So, I think this is kind of the least talked about and one of the most important stories in the energy or foundation layer for clean energy, which we all believe in. I mean, who doesn't believe that climate change is real at this point? I mean, the US military is preparing for it. Forget what politicians say, it's a red meat or blue meat to feed their constituents, their most fervent rabid constituents. But come on, I mean, it is what it is. It doesn't seem to be a logical stretch that polluting in the environment going to cause some kind of problem.
So, anyway, for our solution, if we got to solve for clean energy, geothermal to me, I have not seen a solution that could be at scale, as clean, as reliable, and as cost-efficient as the one staring us right in the face, which is why we rushed out this report to you. Hope you get a chance to look at it. Welcome to July. Have a wonderful day.