Grounded by the World’s Largest IT Outage

I’ve been traveling recently, digging around in places that we wouldn’t think would be important places for artificial intelligence (AI).

I’m in Council Bluffs, Iowa, right now. Fields of corn and soybeans are everywhere… and so is AI.

It’s also a kind of funny day as cybersecurity powerhouse CrowdStrike pushed out a software update that crashed Windows-based machines. It took down most of the U.S. airline industry, grounding flights everywhere. I may have to drive to my next research location.

On a very related topic, I’ve just wrapped up my research on an incredible private artificial intelligence company that will soon be raising capital. I’ll be sending out this research as early as next week to my Day One investors. My Brownstone Unlimited subscribers will, of course, also receive the research.

This is a private deal that I’ve been working on for more than a year, and it’s finally ready to go. Given how hot AI deals are right now – and the quality and valuation of this company – this research can’t wait much longer for me to publish. And the deal won’t last long at all. So please be prepared for it. I’ll provide additional updates next week.

Jeff

Should the World Still Pursue Thorium Reactors?

Hi Jeff, a long time ago, I recall a Bleeding Edge issue where you mentioned thorium reactors. Is it true that thorium is less preferred because its byproduct cannot be used in nuclear weapons? Is thorium more cost-efficient than uranium? Regards.

– Yogesh M.

Hi Yogesh,

This is such an interesting topic and one that has been polarizing in the nuclear power community. It also has some relevant historical context.

First off, thorium (Th-232) is a fertile material, as compared to uranium or plutonium which are fissile materials. Thorium is a radioactive metal, but less radioactive than uranium or plutonium.

Because thorium is a fertile material, it needs to be bombarded with neutrons to create a fission reaction. This is typically done by using Uranium 235 or Plutonium 239 as fissile drivers.

Using these fissile drivers, thorium will breed Uranium 233, which is good fuel for maintaining a fission reaction and producing carbon-free energy.

It is true that Uranium 233 can be used to produce a nuclear weapon. And it is also true that Uranium 233, which is bred from a thorium reactor, is less effective than Uranium 235 for the purpose of a nuclear weapon.

The reality is that when the U.S. government was researching fuels and nuclear reactors to meet the exponential growth of energy demands of the U.S. economy, it found that uranium-based nuclear reactors were simply more efficient than thorium-based reactors. This was the primary driver for the industry, leaning heavily into uranium versus thorium as a fuel.

That decision was at least partially influenced by the proliferation of nuclear weapons at the time, and the need for enriched uranium for that purpose.

This was unfortunate, as thorium reactors produce only a tiny fraction of the amount of radioactive waste as a uranium reactor, and that waste is much shorter lived, measured in “only” hundreds of years.

Thorium reactors are also much safer by design and can be designed in a way that makes a nuclear meltdown impossible.

And to your point, thorium is three to four times more abundant than uranium. And the top five countries for thorium reserves are India, Brazil, Australia, the U.S., and Egypt. Russia is number 9 and China is number 11, so there would be no dependence on either country.

From my perspective, thorium is a safer, more abundant fuel for nuclear fission reactors. And it also produces dramatically less radioactive waste. But despite that, I don’t believe that it will be successful.

The reality is that the cost of fuel is such a small part of operating a nuclear fission reactor, it just isn’t an economic driver for the choice of what kind of reactor to build. And third and fourth-generation nuclear fission reactors, using uranium as a fuel, are now just as safe as thorium reactors would be.

And just because thorium is more abundant in nature, it doesn’t mean that it’s easy or cheap to mine. Thorium is most commonly found in the mineral monazite, which is also a source of rare earth elements. And the extraction of rare earth elements is far more important for the world’s economy right now than mining thorium.

Thorium is just a byproduct, and extracting thorium from monazite is more expensive than the extraction of uranium. But again, the fuel costs wouldn’t be an economic driver for choosing a thorium reactor versus a uranium reactor.

In the end, I just don’t see the economic – or even political – drivers for shifting focus toward thorium reactors. It will actually be more expensive, due to billions needed for research and development.

It will take decades to make the transition to thorium. And before that time would come, we’ll have nuclear fusion technology producing clean, limitless, and very cheap energy.

Will China-Taiwan Tensions Disrupt the Semiconductor Industry?

Hi Jeff, I just read your June 26th Near Future Report issue. I am surprised at your recommendation of Nvidia and TSMC without mentioning the risk of China’s desire to take over Taiwan. Isn’t that a major consideration?

– Mike C.

Hi Mike,

I’ve written extensively over the last three years, in both The Bleeding Edge and Outer Limits about the risk of China taking over Taiwan. It is definitely a critical point. And I’ve even gone so far as predicting that it would happen during President Biden’s presidency. I have about five more months to be proven right.

Just this May, China carried out its most aggressive and comprehensive military drills, even using live ammunition and surrounding Taiwan. It was retribution for Taiwan electing a President it considered to be a “separatist.” For more context, I’d recommend reading Wednesday’s Bleeding Edge.

Xi Jinping built his re-election campaign on taking control of Taiwan. And given the obvious weakness in the White House, there is no better time for China to make its move on Taiwan.

I’ve done business extensively in mainland China, Hong Kong, and Taiwan over the years. I’ve lost count of how many times I’ve been to Beijing, Shanghai, Hong Kong, Taipei, and other locations. And I lived and worked for decades in the Asia Pacific region, so I developed a deep boots-on-the-ground understanding of the regional geopolitics and business culture.

While I believe that the risk of an administrative takeover of Taiwan is extremely high, I also believe that the risk of violent warfare is extremely low. There will certainly be a show of force by China when it happens, but I suspect it will be just that, a “show.”

Controlling Taiwan, much in the way that China took control over Hong Kong, is a way to gain economic leverage on the geopolitical stage. Taiwan’s most valuable economic output, from a global perspective, is its semiconductor industry.

This includes the manufacturing of silicon wafers (upon which semiconductors are etched), the semiconductors themselves, and the packaging of semiconductors (taking a semiconductor die and packaging it so it can be used in a computing system).

I find it highly unlikely that China would restrict Taiwan’s economic engine, especially in semiconductors – let alone destroy it. Not only does China benefit from TSMC’s output, but keeping those semiconductor fabrication plants in working order is precisely what will give China geopolitical leverage.

If China doesn’t like a trade or policy action taken by another country, it can just choke off semiconductor shipments, which would bring entire industries to a halt. It’s that simple. What a powerful position to be in.

And that’s precisely why TSMC, and others, are investing so heavily in manufacturing plants elsewhere. This geopolitical conflict is the catalyst for TSMC’s plans to spend $40 billion in Arizona building semiconductor manufacturing plants.

It’s happening right now, and not just in the semiconductor industry. It’s a domestic manufacturing renaissance – a multi-decade trend towards onshoring and building resilience into supply chains.

It’s a shame it took so long, but it finally started in 2016, with government-led incentives, and it will continue for years to come.

And with the employment of artificial intelligence, robotics, and automation technology, the cost to manufacture goods in the Western world is on a path toward equalization with China.

How Will Criminals Use Multimodal AI?

Hi Jeff, I couldn’t keep myself from responding after reading [about] Open Al’s modal LLM GPT-4o. I’m optimistic by nature, but after reading my views are completely the opposite. How many criminals are going to have a heyday from all these newer technologies? Will we be smart enough to know the difference after being confronted by these criminals? Concerned for the younger generation.

– Ronald B. 

Hi Ronald,

I believe my subscribers will be smart enough to not only know what’s coming but be prepared for it. That’s exactly why we stay on top of these issues.

And to your point, forms of artificial intelligence are already being used for bad purposes. Machine learning, a form of AI, has long been used for cyberattacks. And generative AI is already being used for creating deepfakes to manipulate people and populations.

We have to be very alert, and very smart, about checking and verifying where our information is coming from.

Social engineering is one of the most effective ways that cybercriminals can gain our trust and hack our systems. Appearing to be someone they’re not is something generative AI will greatly enhance. We must always check the sender’s e-mail address and/or source before taking any actions to avoid any risk.

At the same time, U.S. and European tech companies are developing defensive AI technology that is used to identify bad AI before it can do any damage. This is why innovation and a light regulatory touch are so important in AI. We must move quickly to develop the tech. This puts us in a better position to develop technologies to defend against criminal or nation-state attacks.

I also share your concerns about the younger generation. The influence of social media is a net negative on social development. It fosters passive-aggressive behaviors, attention deficit disorders, and virtue signaling, and weakens communication skills, especially when it comes to conflict resolution.

And your average TikTok user has no idea that the company is controlled by the Chinese Communist Party and is used as information warfare to sow discord, hatred, and vitriol, not just in the U.S., but the Western world.

It’s one of the largest psyops campaigns in history, and it’s happening on U.S. soil and elsewhere. (For critical information on how China operates through TikTok and other apps, Outer Limits – One of the Largest PsyOps in History is a must-read.)

For what it’s worth, I see far more good in terms of AI use than bad. And the acceleration of AI development is all focused on applications that will transform the world and dramatically improve our quality of life.

Hopefully, we’ll all have the common sense to allow it to happen and recognize the repercussions of social media platforms before the damage becomes irreparable.

Nuclear Fusion: The Latest and Greatest

Welcome back Jeff!!! I am tremendously happy to have you back again, and I look forward to hearing from you with new insights and recommendations! I do however have one question for you right now. I realize there has been a lot of hype about AI recently, and I believe it will be with us for quite a while. But my question for you today reflects on one of your past “potential” recommendations, i.e., fusion energy. Quite some time has passed since you introduced us to that, so I would like to hear about your current knowledge and state of the technology. And even more specifically, what was the company that you highlighted at that time? I have looked for that recommendation but can’t put my finger on it. Thanks Jeff, and again, “Welcome back!”

 – Roger R.

Hi Roger,

I can only describe the current state of the nuclear fusion industry as vibrant and thriving. I’ve never been more excited.

More than $7.1 billion has been invested by the private sector to date, compared to just $426 million of public funding. And while many have criticized the lack of public funding and government support in the U.S., I believe that’s just fine.

The private industry has been efficiently allocating capital and making incredible progress on the development of compact nuclear fusion reactors, which are the clearest path towards commercialization of limitless, clean, and cheap energy.

Some of the most promising companies that I’ve written about in the past are TAE Technologies (in CA), Commonwealth Fusion Systems (in MA), General Fusion (outside of Vancouver), Helion Energy (outside of Seattle), and Zap Energy (also Seattle).

Addressing Bitcoin Security

Hi Jeff. Love your work, always interesting. I thought that bitcoin’s main claim to fame was it is a safe and secure means of holding wealth i.e., a token: If this is so, how does a company like Gox get hacked? And wouldn’t the bitcoin owners be able to use the blockchain to identify their bitcoin?

– John H. 

Hi John,

You’re right, and this is also true of many other digital assets and their respective blockchains.

And back around the time of the hack, some claimed that there was a deficiency with the bitcoin blockchain, but that was not the case.

The problem was that Mt. Gox was a centralized exchange, kind of like a stockbroker for bitcoin. The bigger problem was that the two founders of Mt. Gox, along with co-conspirators, were found to be the root cause of the theft of bitcoin that took place over a number of years.

Those people gained access to user data, transaction data, as well as the private keys to the Mt. Gox hot wallet. The hot wallet is the digital wallet that Mt. Gox would use to send and receive customer bitcoin when they are withdrawing or depositing customer funds.

Mt. Gox’s failure was lacking the security protocols and processes to minimize any risk of its hot wallet being hacked. And its other mistake was leaving too much bitcoin in a far less secure digital wallet, thus being a major target for bad actors.

Mt. Gox made the problem worse, as it tried to cover up the loss of bitcoin while more and more bitcoin was being siphoned off by the hackers.

This is a great reminder to hold core holdings in a cold wallet, preferably with two-factor authentication of some kind. And the best protection, of course, is a hard wallet that is offline. 

Any Updates on AKTS?

Wondering if Jeff will do a deep dive into the future of AKTS? He and the CEO of AKTS seem to be quite friendly??

– Scot S.

Hi Scot,

CEO Jeff Shealy and his team have done fantastic work on both product and business development for Akoustis (AKTS), despite dealing with a bear market in small-cap stocks, and a patent dispute from Qorvo. The company continues to make major strides with every month that passes.

For more details, I recently provided a couple of updates on Akoustis, one before the news of the outcome of the patent litigation case, and another after.

You can find those here…

Outer Limits – Taking a Fresh Look at Akoustis (AKTS), an Incredible Small Cap Semiconductor Company

Outer Limits – Akoustis’ (AKTS) Funk

And if anything else urgent comes up, my team and I will keep you posted.

Looking at Digital Eclipse’s Purchase by Atari

Hello, I’m happy Jeff Brown and his team are back at Brownstone Unlimited. Could Jeff please provide recommendation on Digital Eclipse and explain what will happen with our investment since Digital Eclipse was purchased by Atari? Jeff was the person who first recommended the investment after all. Thank you for looking out for your subscribers!

– Steve S.

Hi Steve,

I recently provided an update on Digital Eclipse in May in Outer Limits – Atari Acquires Digital Eclipse. And you can find another update here in Outer Limits – Digital Eclipse’s Recent Update. And for those who are Brownstone Unlimited subscribers, you can find the most recent update here.

That’s all we have for today’s AMA. As always, you can send your feedback, questions, and concerns right here.

Have a great weekend!