Swan Dive
The Resource War That Could Outlast the AI Bubble
November 4, 2026 • 4 minute, 47 second read
AI companies are competing for capital at the top of the financial system. As I discussed yesterday, governments are competing for copper, uranium, rare earths, energy and industrial capacity underneath it.
Even an investor who believes he owns neither the AI trade nor the “Sovereign Bloc” directly is exposed to both through an index fund, pension, insurer, bank, bond fund or the companies in his retirement account.
And further through taxation, dysfunctional politics, exploding government debt, and rising Treasury yields.
⛏️ The Sovereign Bloc Goes Shopping
The potential disaster awaiting AI finance has a built-in mitigating factor.
Even if investors eventually decide that somebody built too many data centers, the physical scramble for metals, critical minerals and rare earths underneath them is not confined to Silicon Valley.
Governments – “sovereigns,” in the parlance of Wall Street – now want many of the same materials for defense, energy security and industrial policy.
If the AI boom turns into an expensive exercise in overbuilding, plenty of investors will be left holding the bag. But the scramble for the materials underneath that boom isn’t going away. (Source: Insightace Analytic)
Last week in London, I attended the Financial Times Metals & Mining Summit. Robert Friedland, founder of Ivanhoe Mines and one of the mining industry’s more entertaining truth-tellers, captured the atmosphere with a line I scribbled down immediately.
They might as well have called it the “FT Metals and Defense Summit.”
In a brief private conversation we had with Friedland following his short appearance on stage, he said to me when I asked if he was concerned about the debt for hyperscalers causing a price distortion or a collapse of supply chains and demand for natural resources, precious metals, critical minerals or rare earths.
He laughed.
“Not at all. I know that idea has captured the media’s attention, but the situation is far more grave than the commercial application for the AI-generated porn industry. Governments are hoarding metals because they need them for defense as the global economy Balkanizes.”
“Of course, the hyperscalers will need the steel, too,” he said. “But the sovereign contest is far more urgent. And nobody in the press or commercial world understands the gravity of the historical epoch we’re in.”
Regarding President Trump and the midterm elections, he leaned in and lowered his voice.
“Don’t worry about one guy,” he put his hand on my shoulder, “he’s one guy!”
“The whole ‘permanent’ government — the Lockheed Martins of the world — are scrambling for resources.”
He had a point.
The Americans want domestic and allied supplies of copper, uranium, rare earths and specialty metals. European officials are trying to reduce their dependence on China.
Defense contractors need tungsten, antimony and rare-earth magnets. Technology executives are discovering that an AI strategy eventually becomes an electricity strategy and then, with almost comic inevitability, a mining strategy.
At the summit, mining executives described technology companies showing direct interest in securing long-term supplies of metals.
Governments, meanwhile, are increasingly supplying financing themselves. That is what I mean by the “Sovereign Bloc.”
Not one alliance or treaty. Governments themselves have become major customers, financiers and strategic investors in the base layer.
If the AI bubble bursts, the data center builders may have some explaining to do. But the underlying resource scramble is a different animal. Governments and companies are competing for critical minerals, rare earths and energy supplies regardless of what happens next. (Source: Small Business Expo)
This does not repeal the business cycle. Governments can overpay as enthusiastically as private investors. But it does mean that the resource buildout has another buyer besides the AI promoter.
Which brings us to how we have structured Grey Swan for exactly this sort of environment.
📈 The Classical Investor
The Grey Swan Model Portfolio is the closest thing we have to classical investing.
When we constructed it with Zach Scheidt, we went back to research suggesting that an investor could obtain most of the practical benefit of diversification with roughly 20 carefully selected companies rather than owning several hundred businesses simply because an index committee happened to include them.
Our model divides those 20 positions into two groups. Fifteen are long-term income holdings: established companies selected to produce dividends and compound them. Five are more aggressive companies that still pay income but offer greater potential for capital appreciation.
There is, however, a large caveat.
We began building the portfolio in 2023, after the 2022 bear market had already knocked down valuations.
The portfolio has therefore enjoyed precisely the environment it was designed to enjoy. That does not make the companies bad companies today. It does mean that a rising market can make prudent portfolio construction look more brilliant than it really is.
Hence our continued obsession with the AI bubble.
The portfolio’s job is not to predict when the bubble will collapse. It is to own productive businesses for years and use “the 8th wonder of the modern world,” as Albert Einstein referred to “compounding,” to grow wealth.
Beyond that, our job as writers and thinkers is to notice when the price investors are willing to pay becomes detached from what those businesses can reasonably earn and contribute to your assets by paying you income.
~ Addison
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