By Tae Kim
Surging demand for artificial intelligence might exacerbate a copper shortage later this decade, J.P. Morgan warns.
Copper is an essential component for power infrastructure upgrades based upon its electrical conductivity, use in wires, and relative low cost. Data centers will need to revamp their power and cooling systems as AI servers draw more power per square foot.
Incremental demand from AI is “stressing an already large looking annual copper supply shortfall later this decade,” J.P. Morgan analyst Dominic O’Kane wrote Thursday. “The implications for future copper demand are significant.”
Using the International Energy Agency’s base case scenario of 15% annual power growth for data centers, O’Kane estimates AI will lead to 2.6 million tonnes of additional aggregate copper demand by 2030. Even without the advent of AI power demand, J.P. Morgan had forecast 4 million tonnes cumulative supply shortage through 2030.
“Our analysis suggests that data center copper demand has the potential to add another meaningful pillar to copper’s long-term structural demand growth,” O’Kane wrote Thursday. “We believe the proliferation of data centers, cryptocurrencies and AI/ML could lead to higher power consumption and also demand for electrical equipment like transformers.”
For AI workloads, Nvidia has said that two GPU servers can do the work of a thousand CPU servers at a fraction of the cost and energy. Still, the better performance capabilities of GPUs is leading to more aggregate power usage as developers find innovative new ways to use AI.
O’Kane recommends Anglo American, Teck Resources, and Sandfire as his top global copper stock ideas. He has an Overweight ratings for all three names. The analyst has an Underweight rating for Southern Copper and a Neutral rating for Freeport.
Write to Tae Kim at tae.kim@barrons.com