Pongo Points 11/2/23

White House reigns in AI | Hedge funds go nuclear | Solar and wind power losing steam | Crypto infrastructure isn't so decentralized | Japan fires up a plasma reactor

1. White House Issues Executive Order for AI Safety

Why it’s interesting: The Biden Administration is alert to the benefits and drawbacks of the fast-growing artificial intelligence space, and is working with industry leaders to place guardrails for the continued development of the technology.

  • The order is fairly broad and sweeping, likely meant to provide a framework from which Congress can elaborate and codify greater AI regulation, as it is still subject to judicial review.

What stands out: The United States is attempting to establish dominance in the space by helping guide other nations with the regulation and application of AI, especially since the president released the order just a couple of days before the UK’s AI Safety Summit.

  • The order calls attention to the fact that “more AI startups raised first-time capital in the United States last year than in the next seven countries combined,” in order to reinforce America’s leadership position.

What’s next: The order ends with a section on the government’s deployment of AI, including developing standards for safety, contracting, and the hiring of AI talent, suggesting that AI could soon become a more integral part of the government’s digital infrastructure despite the cautious optimism in the rest of the fact sheet.

2. Hedge Funds Go Nuclear

Why it’s interesting: The price of spot uranium has risen from a low of $47/lb at the start of the year to over $70/lb today, given a number of supply shocks stemming from the Ukraine-Russia conflict to political turmoil in Africa.

  • Between western sanctions on Russia (one of the world’s largest uranium producers) and France’s recent military withdrawal from Niger (which closely trails Russia’s production capacity), the supply of uranium is being squeezed as global demand rises.

What stands out: The article and interviewees name a number of uranium mining and producer stocks, likely targeting speculative returns from upcoming mine openings, but make little mention of either the supply-demand imbalance or other ways to invest in uranium.

  • One fund manager pointed out “lazy capital investing” in uranium stocks and that “many of the nuances of the nuclear fuel markets remain misunderstood,” referencing the recent rise in certain large uranium company stocks.

What’s next: Quoting fund managers from the US, UK, Australia, and Switzerland, Bloomberg highlights the global interest in the increasingly critical role that nuclear energy will play in the transition to a sustainable energy future.

3. Solar and Wind Power Losing Steam

Why it’s interesting: Despite massive investment and grants from governments worldwide, the solar and wind energy industries appear to be struggling with profitability across the entire supply chain - from component manufacturing to installations.

  • This year alone the US Environmental Protection Agency launched a $7 billion program to incentivize more solar energy installations, with more than $32 billion expected from 2022 to 2026 for just solar.

What stands out: Even with generous government subsidies, rising costs and interest rates have delayed (or even forced the cancellation of) various wind and solar projects across the globe, which is making an impact on the upstream component suppliers.

  • Nearly 80% of all wind turbines and solar panels come from China and Longi Green Energy Technology Co., the world’s top solar manufacturer, expressed concerns that half of the firms in the sector could go bankrupt within 2-3 years.

What’s next: With manufacturers and installers struggling to make a profit off of solar and wind energy, it’s only a matter of time before the world pivots more towards other energy production sources, like nuclear or hydro, as demand for electricity continues to grow.

4. Crypto Infrastructure Component Restricts Access to Russia

Read it on X here: @WalletConnect

Why it’s interesting: Crypto infrastructure provider WalletConnect released a statement that they are restricting access to their open-source protocol for Russian IP addresses due to legal advice and OFAC sanctions.

  • The US Office of Foreign Assets Control (OFAC) imposed sweeping sanctions on Russian-owned assets, including digital assets, in February 2022 after Russia’s invasion of Ukraine.

What stands out: Despite touting a decentralized and open-source ethos, WalletConnect’s succumbing to regulatory pressure demonstrates the limitations of some of the original tenets of the crypto movement.

  • While WalletConnect, Inc is technically a private company, it is a centralized service that enables crypto wallets to interact with various protocols and smart contracts on supported blockchains.

What’s next: The crypto industry will naturally coalesce into more centralized products and services, as that transformation seems critical to earning the approval of international governments and regulatory bodies.

5. Japan Splits from Fission in Favor of Fusion

Why it’s interesting: Fusion energy has seen a massive influx of private investment in recent years, with early fusion startups receiving forward-looking power purchase agreements from heavyweights like Microsoft.

  • There is a strong desire to research fusion energy despite limited developments, as global investment totals over $6.2 billion cumulatively.

What stands out: The JT-60SA project in Japan had been delayed a number of years, with an initial launch expected in 2016, and may not even provide actionable results by 2050.

  • An ongoing joke among physicists and pessimists is that fusion energy is always “50 years away” from reaching commercial breakthroughs.

What’s next: While investment in fusion energy is still far lower than that of nuclear fission, it reflects an optimism for unintuitive breakthrough in physics and a possibility for nuclear energy to rid itself of its inevitable association with military ordinance.

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