Open Circuit – “The AI race is really an electro-industrial race”

Podcast: Open Circuit
Host: Latitude Media (Stephen Lacy, with Kathryn Hamilton and Jigar Shah)
Date: October 24, 2025

Episode Overview

This episode unpacks the notion that the current AI “arms race” between the US and China is fundamentally more about control over the electro-industrial stack—the foundational materials, manufacturing systems, and infrastructure that underpin not just artificial intelligence, but the entire future of energy, transportation, and tech. The hosts explore the shifting economic and geopolitical landscape, analyzing recent mineral export restrictions, domestic policy responses, the intertwined fates of advanced tech and energy, and the broader implications of China’s integrated electrostate model compared to US fragmentation.

Key Discussion Points & Insights

1. From Chip War to Mineral War: The New Front Line (09:00–17:30)

• Context: US has tried to block China’s access to AI chips. China counters with restrictions on exports of rare earths and critical minerals (graphite, gallium, germanium, etc.), which are essential to electronics, batteries, clean energy, and more.
• Potential Impact: These minerals are a tiny fraction of end-product cost, but their disruption can stall massive industries. New trade rules mean foreign companies need China’s license to buy or process them.
• US Reaction: US threatens new tariffs in retaliation, fearing it may not be able to diversify supply chains fast enough.

Notable Quotes:

• "China overplayed their hand and I think it's uncharacteristic of China to be so stupid. But they are, I think."
  – Jigar Shah [10:39]
• "Rare earths are not rare, they just are unprofitable to process. And China has made them unprofitable to process... so now, everybody is going to process rare earths, because it just doesn't matter."
  – Jigar Shah [10:45]

2. How Exposed is the US (and Clean Energy) to Mineral Supply Disruptions? (12:15–17:30)

• Supply Chain Reality: China mines ~70%, processes 85–90%, and produces >90% of magnets globally.
• Industry on Edge: Companies reliant on Chinese magnets/materials are scrambling, stuck with complicated export forms and restrictions, and nervous about supply continuity.
• Need for Infrastructure: US must simultaneously develop mining/refining, processing, AND recycling if it hopes to seriously compete or be resilient.

Notable Quotes:

• "It’s going to take a couple of decades to actually put all of this infrastructure into place."
  – Kathryn Hamilton [15:47]
• "We cannot forget about recycling and reprocessing because we could use that to great effect too."
  – Kathryn Hamilton [15:58]

3. US Policy: Strategy or Whack-a-Mole? (17:14–21:45)

• Mixed Signals from Washington: Active investment and stockpiling from Defense; DOE grants under pressure from political churn.
• Fragmented Approach: No industrial systems plan; reactions often politicized and short-term, not cohesive.
• Comparison to China: China’s advantage comes from systematic, long-term, vertically integrated planning and execution.

Notable Quotes:

• "Are you saying that they're winging it, Catherine?"
  – Jigar Shah [18:09]
• "If we somehow combine some of the urgency that the Trump administration is acting with and some of the philosophical thinking that the Biden administration have, maybe we would get somewhere that made sense. But right now they’re just going at it haphazardly."
  – Kathryn Hamilton [18:15]

4. The Refining & Recycling Bottleneck (21:56–25:58)

• Mining Development Lags: Mining projects take years/decades; refining capacity is a shakier, nearer-term bottleneck.
• Urban Mining Potential: Companies like Redwood Materials and Li-Cycle offer hope in battery recycling and urban mining—and demonstrate strong US tech, but need policy and guaranteed feedstock & offtake to scale.
• Lessons from Europe: Extended producer responsibility in the EU ensures a steady recycling stream, which the US lacks.

Notable Quotes:

• "We have far better technology than the Chinese have in this area…but unless the minerals were at a 10% discount to China, people were continuing to buy from China."
  – Jigar Shah [22:51]
• "You need the integration of the feedstock with the technology and the offtake to make it all work."
  – Kathryn Hamilton [24:47]

5. The “Electric Stack”: Understanding the New Age of Industrial Power (28:18–36:00)

• What is the Electric Stack?
  Lithium-ion batteries (heart), magnets and electric motors (muscles), power electronics (nervous system), and embedded compute (brains)—AI needs all four layers.
• Why it Matters: Everything—from phones and cars to grids and defense systems—relies on these components. The transition from hydrocarbons to electromagnetic systems offers efficiency, control, and durability.
• China’s Lead: China has become the world’s first true “electrostate,” mastering not just production of components, but their integration, mutual reinforcement, and scale.

Notable Quotes:

• "America is systematically overemphasizing the role AI will play in the future and underestimating the role electrification will play."
  – Paraphrased from Packy McCormick and Sam D’Amico, summarized by Stephen Lacy [28:18]
• "Magnets and motors are in everything. And that's just one piece of the electric stack. AI needs all of it."
  – Kathryn Hamilton [30:10]

6. US Industrial Blind Spots vs. China’s Model (36:00–42:57)

• China’s Playbook:

  • Patient, vertically and horizontally integrated ecosystems
  • Iteration and scale, not just IP theft or cheap labor
  • Synergies: companies like BYD can make cars, batteries, solar systems, electronics in one place
  • Copies and innovates, often convincing US/EU firms to build domestically and then rapidly localizing

• US Challenge:

  • Fragmented manufacturing base, missing the benefits of integration and feedback
  • Struggles to coordinate policy, protect IP, or incentivize domestic scale against subsidized Chinese competition

Notable Quotes:

• "China’s industrial base is like one continuous machine with energy, manufacturing, logistics all integrated, while ours is very fragmented."
  – Stephen Lacy [39:10]
• "We are greenwashing China. And I don't understand it exactly... all of that is illegal. I don't think anyone is talking about the IP theft anymore. No one is talking about human rights abuses anymore. And we're all just saying, but look how awesome the results of all those human rights abuses and IP theft are."
  – Jigar Shah [40:25]

7. Policy, Competition, and the Path Forward (42:57–47:50)

• Western Values: US and allies want to avoid China’s mistakes—environmental harm, overdevelopment, suppression of rights—but this means higher costs and slower response.
• Policy Needed: In the US, effective policy must close the innovation-to-scale gap, support recycling, and encourage partnerships and integration WITHOUT mirroring China’s flaws.

Notable Quotes:

• "We want to have clean air and clean water and land that we can use… we need policy, right?"
  – Kathryn Hamilton [43:22]
• "I think for a lot of our tenure we were getting to 70% of [electricity demand] growth or 80%... but now we're at fully 100%. I don't think that China is way far ahead of us… but it is very clear that China picked up on this trend before everybody else did."
  – Jigar Shah [33:00]

8. The Myth of US Energy/Industrial Decline? (47:50–54:55)

• The “Electric Slide” Essay: Argues the US is misallocating resources to ideas and “intelligence” over actionable industrial muscle.
• Hosts’ Rebuttal: While the US has work to do, it’s not as if meeting energy or AI load is impossible, and the US retains major strengths in technology, innovation, and potential for collaboration.

Notable Quotes:

• "The notion that the United States has ever failed to meet its electricity supply is ridiculous. Like, we've never failed and we won't fail this time."
  – Jigar Shah [50:21]
• "America’s greatest strength, which is its innovation culture, has been decoupled from its capacity to manufacture and deploy at scale."
  – Paraphrased from Electric Slide by Stephen Lacy [49:13]
• "I see a lot of other countries trying to look internally… I do think that there's a huge amount of hope here that we're not lost to China."
  – Kathryn Hamilton [52:59]

Memorable Moments & Quotes

• On the “systemic” nature of the race:
  "This isn't just a chip war or a mineral war. It's a systems war."
  – Stephen Lacy [28:18]

• On integrating recycling into the stack:
  "You can have all of the great technology in the world… [but] they need a guaranteed feedstock to be able to put in there, because then you actually get minerals that are at full value."
  – Kathryn Hamilton [24:47]

• On the competitiveness of US tech:
  "All the next breakthroughs are still being invented in the United States… getting to a thousand, you know, units of density for lithium-ion batteries is things that we can do and China can't do."
  – Jigar Shah [31:40]

• On China’s ecosystem:
  "They have had a long time to do it. I don't think they're the only ones who can do it. And in fact, Tesla is a good case study for that..."
  – Kathryn Hamilton [34:49]

Timestamps for Key Segments

• 00:48–04:28: Opening banter & introductions
• 09:00–10:38: US-Chinese mineral trade war, rare earth leverage
• 10:39–12:17: Jigar’s hot take: China overplayed on minerals, global diversification inevitable
• 12:22–14:04: Clean energy exposure & processing dependency
• 15:42–17:45: The slow, costly challenge of supply chain and recycling infrastructure
• 17:45–21:55: US policy—lack of strategy, political churn, reliance on grants
• 21:56–25:58: Refining, recycling, and “urban mining”
• 28:18–36:00: The ‘electric stack’—explaining & contextualizing China’s dominance
• 36:50–42:57: China’s industrial integration vs. US fragmentation
• 42:57–47:50: Policy solutions, competing on values, cost, and innovation
• 47:50–54:55: AI, energy, the “Electric Slide” thesis, and where US innovation fits

Episode in a Nutshell

While the headlines focus on semiconductor chips and AI, the true contest shaping global power is over the entire “electric stack”—the minerals, manufacturing, recycling, and infrastructure systems that enable both intelligence and clean energy. China recognized this early, building a formidable, integrated ecosystem. The US, meanwhile, risks falling behind not in ideas, but in scalable, resilient industrial muscle—unless it unites its fragmented efforts and closes policy, financing, and supply chain gaps. Still, the next several decades are unwritten: innovation, reform, and investment choices made now will determine who commands the electro-industrial future.

Recommended Reading:

• “The Electric Slide” by Packy McCormick & Sam D’Amico
• Reports from Ember and Noah Smith on electrotech dominance
• Essays from Andreessen Horowitz on electric stack economics

Tone: Thoughtful, candid, slightly irreverent, always grounded in deep industry experience.

For those who haven’t listened:
This episode is essentially an urgent call to understand that the AI “race” is inextricably linked to the broader—and arguably more consequential—battle for control over the nuts-and-bolts of the modern economy: energy, minerals, electrification, and manufacturing. The hosts challenge easy narratives, recognize the risks of China’s “success,” and make clear that winning the future depends on much more than clever code.