The Seen and the Unseen: The Real AI Trade
Bastiat’s lesson in “seen vs unseen” is about to make traders rich.
Frédéric Bastiat wrote in the mid-1800s that in economics, there is always what is seen and what is unseen. The seen is the immediate effect, the shiny headline, the surface-level explanation. The unseen is the ripple effect — the costs, the dependencies, the second- and third-order consequences that actually drive outcomes.
In today’s markets, the seen is obvious: Artificial Intelligence. AI is the headline-grabber, the driver of stock market narratives, the sector everyone wants to own. You can’t flip through CNBC or Bloomberg without hearing that AI is the new industrial revolution. And to be clear — they’re not wrong.
But what’s unseen is what it takes to power AI. Behind every ChatGPT response, every Nvidia data center, every robot training set, lies one unavoidable truth: energy consumption is about to go vertical.
And here’s where Bastiat would nod: the unseen story is where the real opportunity lies.
Coal: The Dirty Truth That Won’t Go Away
Nobody wants to talk about coal. Politicians hate it, ESG funds avoid it, and climate activists want it banned yesterday. Yet coal still powers ~35% of the world’s electricity (IEA, 2024).
China alone consumes more coal than the rest of the world combined. India continues to build coal plants because renewables can’t keep up with demand growth. Even Europe — the poster child for clean energy rhetoric — quietly boosted coal imports after the Russia-Ukraine war disrupted natural gas supplies.
And investors who ignored the narrative and just watched price action? They’ve been rewarded.
Look at the Dow Jones Coal Stock Index.
After years of being left for dead, it’s broken out to multi-year highs. That’s not a dead cat bounce. That’s demand showing up in price.
The seen is AI stocks. The unseen is that every AI server farm, every data center, every Tesla charging station is powered by electricity that — in no small part — still comes from coal.
Oil: Still the Lifeblood
For decades, we’ve been told oil demand will peak “in five years.” Funny how it’s always five years away.
The truth is that oil still makes up ~31% of global energy consumption (EIA, 2024). Despite the EV transition, global oil demand in 2024 hit a record 102 million barrels per day. And guess what? It’s on pace to rise again in 2025.
Here’s the kicker: The XLE Energy ETF is coiling just under a major breakout level at 101. A clean move above that number could trigger a secular rally in energy stocks.
And the macro backdrop makes this even more combustible. Global yields are rising — from the U.S. to Germany to Japan — while central banks are under pressure to cut. Inflation isn’t dead. It’s was resting. Now it’s waking up.
Bank of England policy maker Swati Dhingra recently called for more rate cuts, dismissing UK inflation as an “outlier.” That’s the seen. The unseen is that bond markets are already screaming higher inflation expectations. Oil loves that environment.
When the long end of the yield curve rises while the Fed cuts, that’s called a bull steepener. Historically, that’s when commodities run. And oil is the heartbeat of that move.
Natural Gas: The Wild Child
Natural gas is the volatile child of the energy complex. Traders love to hate it because of the wild price swings. But fundamentals don’t lie: demand for natural gas is relentless.
Power generation: As coal plants close in some regions, natural gas is the default replacement.
Heating: Homes and industries across Europe, North America, and Asia rely on it.
Fertilizer & chemicals: Natural gas is a critical input in ammonia production, plastics, and industrial processes.
LNG exports: The U.S. is now the world’s largest LNG exporter, shipping gas to Europe and Asia.
The chart doesn’t lie either. Natural gas futures ($NG_F) are basing after a brutal downtrend, sitting near a false breakdown buy zone. Stay patient.
The unseen is this: AI data centers don’t just need power. They need baseload power. And that’s exactly where natural gas shines. It’s flexible, dispatchable, and scalable.
The narrative is renewables. The reality is natural gas.
Metals: The Foundation of AI
If AI is the new revolution, metals are the bricks and steel that build it. You don’t get data centers, chips, or EVs without a tidal wave of raw material demand.
Copper: The backbone of electrification. Every EV uses 2–3x more copper than a gas car. Every data center requires miles of copper wiring. Global demand is set to double by 2035 (IEA).
Silver: Essential for solar panels, electronics, and high-performance computing. Demand hit a record 1.2 billion ounces in 2023.
Rare earths: Critical for magnets in wind turbines, EV motors, and advanced chips. China dominates supply, which makes diversification urgent.
Uranium: The comeback story. Nuclear power is back on the table as governments admit they can’t meet carbon targets without it.
Price action in copper miners and precious metal miners globally confirm it:
Tech is up ~20% YTD and it is getting massively outperformed by metals and mining.
Precious metal miners are up over 110%.
Copper miners ($COPX) are ripping to new highs.
That’s not random. That’s the market telling you that the unseen demand wave is already here.
Inflation: The Fuel for the Fire
Inflation is the word nobody wants to say out loud. Politicians call it transitory. Central bankers call it contained. Headlines mock anyone who brings it up.
But look at the charts. Long-term yields have been rising since March 2020. The CRB commodity index is in one of the tightest Bollinger Band squeezes in history. When that resolves, it’s not going to drift. It’s going to explode.
And what do commodities do in inflationary regimes? They lead.
The seen is disinflation narratives. The unseen is the bond market, already repricing the future. 👇
The Real AI Trade
Everyone sees AI stocks. They’re not wrong — AI will continue to dominate flows. But the unseen is the power it consumes and the metals it requires.
Coal is breaking out.
Oil is coiling under a secular breakout.
Natural gas is bottoming.
Metals are already outperforming tech.
Uranium remains a structural bull.
This is Bastiat in real time. The seen is shiny AI stocks. The unseen is the commodity supercycle powering them.
Final Word
Frédéric Bastiat wrote: “It almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse.”
The immediate consequence of AI is booming tech stocks. The ultimate consequence is an energy and metals squeeze that will define the next decade.
At AAO Research, we’ve been positioning for this for years. Long uranium. Long metals. Watching energy coil and adding stocks as we go along. Now the charts confirm it: the unseen is about to become impossible to ignore.
The seen is sexy. The unseen is profitable.
And if Bastiat were alive today, I think he’d say the same thing I will: get long commodities.
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What a read!! ♥️
Wonderful read Jason. Pure gold (pun intended). 😀