Technically a program authored by another AI in bytecode wouldn't be "hand written" as the AI doesn't have hands...

I'm loving this story so far!

Some analysis of the key premise:

In this scenario, the strategic situation between AIs seems to be a sort of mexican standoff slash dark forest.

In particular, each AI is strongly incentivised to remain hidden. Whatever benefits they may get from doing things openly -- more compute, more data, more political power, more destruction of their rivals -- must be outweighed by the costs. This incentive must (a) apply even to the very first AI to be built (though how does that work with continuous progress?) and (b) must be strong enough that no AI reveals themselves for a substantial period of time, long enough for there to be about a dozen AIs in the world one of which was built in a basement by an individual! The incentive, according to the story, is that revealing yourself makes you a target for others who have not yet revealed themselves. I suppose this makes sense if (c) there is a heavy offense-defense imbalance in favor of offense.

How plausible is this?

(c) seems about 50-50 to me. Early AIs might depend on human puppets for a lot of things, especially legitimacy. Those puppets can be targeted easily in a variety of ways, many of which don't involve revealing yourself. Moreover, the AI-human team will receive a lot of attention, esp. from the local government, when it is "outed." Plausibly this attention is significantly more burdensome and harmful than it is helpful. Plausibly there are subtle, hiddenness-preserving things other AIs can do to make this attention worse for you than it would be naturally. On the other hand, I don't feel like these arguments are strong enough to make me go higher than 50-50. Trying to argue in the opposite direction: Maybe there is at least one big first-mover advantage, such as gaining access to humans in positions of power and persuading them to become your puppets, that are powerful enough to compensate for the other disadvantages of being public. This seems fairly plausible to me.

(c&a) seems somewhat less likely than (c). Conditional on (c), even the first AI should be rationally uncertain about whether they are first, yes. However, they should ask themselves: Will waiting, and thereby letting there be more AIs created, yield a distribution over outcomes that is better for me than taking my chances now? In order for the answer to be "yes," it must be that e.g. even an AI which is 70% sure it's the first (say, it's made by a huge company with the world's brightest minds, and it's slightly ahead of various in-retrospect-obvious forecasting trends, and the internet data it's ingested paints a picture of the rival companies that indicates they are behind and seems like a trustworthy picture) thinks it has a better chance at winning if it waits than if it takes that 70% chance of being the only one on the field. (70% is my current hot take at how confident the first AI is likely to be that they are first conditional on (c). I could see arguments that it should be higher or lower.) Yeah, (c&a) seems overall like credence 0.1 to me.

(a&b&c) is of course even less likely. The sort of hardware some individual could have in their basement will be something like three to five orders of magnitude less than what the big AI firms have. And compute costs are going down, but even if the rate of decrease accelerates significantly, that's like a one to two decade gap right there between when an individual has the hardware and when a corporation did. It seems very unlikely to me that AIs will still be hidden 10 years after their creation. I suppose we could lessen the implausibility by thinking that the big corporations are limited by algorithms whereas this lone individual is a genius with great algorithmic ideas, enough to overcome a 3-5 OOM disadvantage in compute, but still. I think compute is pretty important, and the AI research community is pretty large and smart and good at coming up with ideas, so I don't find that very plausible either. So I'm currently guessing (a&b&c) = 0.01.

This is high praise IMO; 0.01 is orders of magnitude more plausible than the basic premise of most sci-fi scenarios I think, even hard sci-fi.

(P.S. I've ignored the issue of how to think about this if instead of having a discontinuous jump from dumb to smart AI, we have a more continuous progression. I guess (a) would be replaced by something like "At some point while AIs are pretty dumb, their handlers start to think that concealing their capabilities is important, and this incentive to conceal only increases as AIs get smarter and as the locus of control shifts from "Human handlers with AIs" to "AIs with human puppets.")

“If a sixteen-year-old can build an AGI on the salvaged hardware running in his basement then lots of other actors have had the power to do this for at least a decade,”

There are some interesting anthropic explanations for that as well.

Of course Sheele could be lying.