The Zhitong Finance App learned that artificial intelligence (AI) has been driving Nvidia (NVDA.US) and other semiconductor companies' stock prices to soar since 2023. As the use cases of artificial intelligence increase, global copper demand is also expected to soar.
J.P. Morgan analyst Dominic O'kane said that global copper demand has surged, driven by exponential growth in artificial intelligence, and it is expected that there may be a supply gap by 2030.
It is estimated that 1 megawatt of data center power capacity may require 20 to 40 tons of copper. This forecast highlights AI's huge demand for copper resources.
The International Energy Agency (IEA) predicts that under the basic scenario, global data center power demand will grow at a compound annual rate of 15% by 2026.
Notably, Morgan Stanley also believes that with the rapid development of artificial intelligence technology, copper demand will increase significantly, and AI data centers will become a new growth point for copper demand. By the fourth quarter of 2024, the price of copper may rise to 10,500 US dollars/ton, which is 18% higher than the current level.
Morgan Stanley said that by 2027, AI data center demand for copper may account for 3.3% of global copper demand, which will drive up copper prices and have a profound impact on the global copper market. By contrast, electric vehicles may account for only 5.2% of demand.
Given the huge potential for copper demand, O'Kane is bullish on the following 3 stocks:
Anglo-American Resources (AAUKF.US, NGLOY.US). The company's business is mainly focused on Europe, the Middle East, and Africa (EMEA), and although copper's revenue exposure is only 20-25%, it still has significant upside potential.
Tektronix Resources Ltd. (TECK.US). The company mainly operates in North America and is listed as a preferred stock by J.P. Morgan Chase due to its good growth prospects.
Sandfire Resources. Sandfire Resources, headquartered in Australia, focuses on copper production and has a market capitalization of just $2.6 billion, making it an attractive investment opportunity.
The surge in demand for copper driven by artificial intelligence presents challenges and opportunities for investors and the mining industry. O'kane emphasized the importance of considering multi-sector, cross-asset, and environmental, social, and governance (ESG) factors in investment decisions.
Furthermore, the integration of the global mining industry highlights the strategic importance of companies such as Anglo-American Resources, Tektronix Resources and Sandfire in meeting the growing demand for copper.