A compelling new narrative suggests the AI revolution will be driven not just by silicon chips, but by copper, oil, and other raw materials.
This is the core of Bank of America strategist Michael Hartnett's argument: the AI race is fundamentally a resource race. For a long time, we've viewed technology as a digital-first industry. But building the massive infrastructure for AI—sprawling data centers, advanced semiconductors, and vast power grids—requires immense amounts of physical resources. Think of the copper for wiring, the power to run the servers, and the specialty metals for cutting-edge chips. This perspective transforms the AI narrative from a tech story into an old-economy commodity story.
Recent events provide strong evidence for this causal link. First, geopolitical instability is directly impacting resource availability. Tensions in the Middle East recently caused Brent crude oil to spike above $100 per barrel. When a temporary ceasefire was announced, prices immediately dropped, showing how sensitive markets are to supply disruptions. This highlights that access to energy, a critical input for AI data centers, is not guaranteed and is subject to real-world conflicts.
Second, the demand from the AI industry is undeniable. Major tech firms and chipmakers like TSMC are forecasting enormous capital expenditures, with data center spending expected to approach $1 trillion. This isn't just a number on a spreadsheet; it translates into concrete, long-term orders for copper, aluminum, and other essential materials. This sustained demand puts upward pressure on commodity prices.
Finally, the broader macroeconomic environment is also favorable for commodities. Persistent government budget deficits and a weaker U.S. dollar create a tailwind for raw materials, which are typically priced in dollars. A weaker dollar makes them more affordable for buyers using other currencies, further boosting demand.
This isn't just a theory; the market is voting with its money. Year-to-date, broad commodity funds have returned over 28%, while the S&P 500 has been flat. This rotation shows that investors are taking seriously the idea that in the age of AI, those who control the resources will hold the keys to the future.
- Supercycle: A long-term, sustained period of price increases for a wide range of commodities, often driven by a structural shift in demand.
- Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.
- Geopolitical Risk: The risk that a country's political actions, social changes, or conflicts will negatively impact business operations or investments.