AI Runs on Rocks

Whether it’s the development of electricity or the internet, whoever developed that technology first often maintains the advantage.

Yet, that gain seldom lasts.

Inevitably, the rest of the world catches up to new innovations and those margins diminish… Nigeria runs on the same grid as London today. New Delhi gets the same Wi-Fi as New York.

In virtually all cases, technology spread its innovations across the globe, trimming back the early advantages the leader once held.

Yet, some commentators are pointing out that the AI story could unfold a little differently.

In other words, the early leader in AI won’t just hold a temporary head start; they’ll retain an advantage that compounds over time.

So, why is that a critical difference?

Answer: Defence

Clearly, the language coming out of Washington and Beijing is starting to resemble wartime rhetoric rather than trade policy, and that’s because of AI.

Former US Secretary of Defence Mark Esper has said that whichever nation harnesses AI first will hold a decisive military advantage for years to come.

The Centre for Strategic and International Studies has gone further, arguing that the future of deterrence itself will be decided less by tanks and troops than by control of the rare earth elements powering AI, drones and defence systems.

And it’s not just defence figures saying it. The Council on Foreign Relations recently convened a task force on this exact issue, chaired by the CEO of Lockheed Martin. Its conclusion: this is a contest America “can and must win.”

When a defence contractor’s chief executive is chairing foreign policy panels about mineral supply chains, you know the conversation has moved well beyond ordinary trade policy.

Why this matters for raw materials

If you agree that AI has a war-like ‘arms-race’ element to it, given its crucial role in defence, you need to consider the supply chains that bring it into existence.

In an actual war, you don’t shop around for the best price on steel. You secure it, whatever the cost, because losing access costs infinitely more than overpaying.

That behaviour is now on display: trillion-dollar tech deals. Executive orders. Tariffs. A $12 billion critical minerals stockpile. Washington taking direct equity stakes in mining companies.

On the other side, Beijing already controls the chokepoints. It can squeeze exports, delay licences, and force buyers to scramble for alternatives.

A Command Economy, Built to Beat One

When two superpowers are forced to bid against each other for the same finite band of resources, the money has to land somewhere.

In this case, it’s increasingly likely to head towards miners, refiners, and energy producers. This is a key point that we haven’t detailed enough in Mining Memo.

We’ve delved into the commodity cycle and discussed how events are unfolding towards greater geopolitical friction, but it seems AI could be the key catalyst in bringing this commodity cycle to a major culmination over the next couple of years.

Each commodity uplift has a key theme underlying it that tends to spark irrational pricing and speculation.

The last one was China in the early 2000s, as it pulled millions of people out of rural poverty and into giant cities. A commodity-intensive undertaking.

Yet what’s unfolding today very much reflects that era’s insatiable demand for raw materials.

Are we on the path to surpassing those lofty mining stock valuations from the early 2000s? It’s certainly possible, given we now have two superpowers potentially vying for the same resources.

Yet we’re still in the rhetoric phase, but when those words turn to action, that’s when we could see a major uplift in this cycle.

That’s something we discuss in more detail here.

Until next time.