In 1848, a 29-year-old Sacramento shop owner named Samuel Brannan was managing his store when two shoppers entered and offered to pay with gold nuggets. Brannan was astonished by the solid gold, which the shoppers claimed was found at Sutter’s Mill, roughly 35 miles northeast of Sacramento.
Brannan owned the only shop between San Francisco and Sutter’s Mill, but he also ran a newspaper. Using his paper, he quickly spread the word about the gold discovery. According to legend, Brannan even carried a small vial of gold to show prospective miners and once ran through the streets of San Francisco shouting, “Gold! Gold from the American River!”
His newspaper ran stories claiming that with just a shovel, a pick, and a pan, anyone could strike it rich in California. This hype is said to have helped trigger the Gold Rush, attracting 300,000 people to California in 1849, giving rise to the moniker “the San Francisco 49ers.”
However, Brannan did not join the rush to dig for gold. Instead, he sold about $5,000 worth of shovels, picks, pans, and other equipment to miners each day at his store, equivalent to nearly $200,000 per day in 2024 dollars. This savvy business strategy made Brannan California’s first millionaire.
The Modern Gold Rush: Artificial Intelligence
Today, the biggest new gold mine for investors is artificial intelligence (AI). Nvidia is a major player, producing the hardware (GPUs) essential for popular AI applications like ChatGPT. However, beyond hardware, AI has a significant ongoing energy need.
For every dollar spent on a GPU (which can easily cost over $40,000 each), companies spend another dollar on energy to run it. AI applications like ChatGPT have two stages: training and querying. Training involves feeding vast amounts of data into the algorithm, which is extremely power-intensive, equivalent to the electricity usage of tens of thousands of homes.
The querying phase, where users request tasks (e.g., “Generate an image of a cat playing the harmonica”), also requires substantial energy, about 10 times as much as Google uses for its entire search function. This growing demand puts immense strain on America’s already struggling power grid, further exacerbated by the push for electric vehicles and the reliance on inefficient “green energy” sources like wind and solar.
The Energy Solution: Natural Gas
Given the power infrastructure challenges, big tech companies are considering building their own power plants to ensure a stable electricity supply for their data centers. The best solution would be small-scale nuclear reactors, but that technology isn’t ready yet. The next best option is natural gas, which is reliable and inexpensive.
US natural gas is priced around $2.50 per million BTUs, making it one of the most underpriced commodities in the world. In terms of pure energy, $2.50 natural gas is equivalent to a barrel of oil selling for about $15. This makes US natural gas a highly attractive energy source for new power plants driving the AI boom.
Conclusion: Investing in Natural Gas
Natural gas presents a significant “picks and shovels” investment opportunity in the AI space. It is the cheapest form of energy available and essential for the power-hungry demands of AI applications. Moreover, the stock prices of many high-quality and profitable natural gas producers are currently very low, offering substantial upside potential.
By investing in natural gas, you can position yourself strategically in the AI revolution, much like Samuel Brannan did during the Gold Rush, reaping the benefits of providing the essential tools needed for success.
