Copper crunch: Data centres, AI and the supply squeeze

Although copper is positioned to play a central role in the ongoing expansion of artificial intelligence and data centres, its investment appeal extends well beyond these areas. Broader trends such as rising military spending, electrification and India’s economic development all point to sustained demand for copper.⁵ CIBC Asset Management Global Research expects global GDP growth in the area of 3.2%, which should continue to underpin copper prices. With demand rising and supply remaining tight, the case for copper remains compelling.

As copper balances tighten and prices rise, we anticipate substitution towards aluminum. Aluminum has historically benefitted from copper deficits. We expect aluminum to be a second order beneficiary of the growth in AI infrastructure.⁶

CIBC Asset Management’s Credit Research Team is on the lookout for opportunities that are poised to benefit from these market dynamics.

Contact your CIBC representative to help identify how to access this opportunity.

Dive deeper into copper by accessing our full report Copper crunch: Data centres, AI and the new supply squeeze (PDF, 2.7 MB) Opens a new window..

¹ McKinsey Quarterly: The cost of compute: A $7 trillion race to scale data centers Opens a new window.

² BHP Insights: how copper will shape our future Opens a new window.

³ Estimates are conditional on current prices and state of development, permitting timelines and mining methods.

⁴ We model recycling increase through 2040. As copper price rises, recycling and scrap availability will likely pick up, thereby adding copper supply and helping partially reduce the deficit. BAU demand estimates from Cathles, L.M., and Simon A.C., 2024, Copper Mining and Vehicle Electrification: A report by the International Energy Forum Opens a new window.. Our estimate of incremental data centre-related copper requirement is added, based on a range of industry forecasts for DC installed capacity in 2030 and an extrapolation of energy consumption estimates from the IEA.

⁵ CIBC Asset Management: Inflation and commodities: Medium-term outlook and portfolio implications (PDF, 1.5 MB) Opens a new window.

⁶ Aluminum is a prime though not a perfect substitute for copper. It can replace copper in some cases, but differences in conductivity, strength, corrosion resistance and reliability mean that copper remains essential for many critical applications. Substitution is often a trade-off between cost, performance and strength. Having said that, Aluminum is still the closest substitute to copper for electrical and industrial applications and a direct beneficiary of copper scarcity.