The Tamesis
rise. Metal use to build AI data centers is increasing
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The enthusiasm for building artificial intelligence (AI) data centers is not just a technology investment story, but also about the metal that these data centers are built on and the power that drives the servers.
That’s why Olivia Markham, one of the world’s most important resources investors, sees the beginnings of a mining boom.
BlackRock’s New York headquarters (Photo by Michael M. Santiago/Getty Images)
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Earlier this week, Markham, who serves as portfolio manager for the $10 billion BlackRock World Mining Fund and World Mining Trust alongside Evy Hambro, told a mining conference in Perth, Australia, that mining companies were struggling to meet demand for their minerals and metals.
“Commodity demand is accelerating and the commodity intensity of GDP growth continues to rise,” she said.
“The story of artificial intelligence is as much a story of technology as it is of power and metal.”
But Markham believes not enough investors recognize the direct connection between artificial intelligence and the world of commodities.
Goldman Sachs agrees
A few days ago, investment bank Goldman Sachs made a similar point in a research report on the demand for Agentic AI.
Goldman Sachs said: “We believe that current digital infrastructure is unlikely to sustain Agentic AI.”
“These always-on autonomous systems are 60 to 130 times more energy intensive than AI chatbots, requiring a complete rebuild of the physical architecture outside of the data center.”
Copper sheets in rolls produced by Revere Copper Products, Rome, NY. Photographer: Lauren Petracca/Bloomberg
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Copper and aluminum have been two of the biggest gainers amid the data center building boom, with shares of major copper miners such as BHP Billiton and Rio Tinto rising sharply.
BHP shares are up 36% this year, including a 13% gain last month. Rio Tinto is up 25% this year and 8% over the past month.
Goldman Sachs said in a report titled “Investing in the Future Architecture of Artificial Intelligence” that investment opportunities in this technology are shifting downstream.
Without metals, there would be no artificial intelligence
“Future growth depends on ‘pick-and-shovel’ companies providing solutions across data centers, power transmission, advanced cooling, grid-connected power generation and the skilled workforce that addresses physical constraints,” the bank said.
Markham’s view is that AI’s value trajectory will be deeper because the pick-and-shovel assets Goldman Sachs nominated cannot function without the underlying building blocks of minerals and metals.
Demand for basic raw materials has been exacerbated by the blockade in the Persian Gulf, which has created choke points for a variety of commodities in the Strait of Hormuz, she said.
association
The challenges facing mining are relevant to global investors because many mining companies are too small to meet the needs of fund managers with billions of dollars in capital.
Markham said miners will need greater scale to be effective, which could mean a new round of mergers at the top end of the industry, such as London-based Anglo American’s partial acquisition of Canada’s Teck Resources.
More reasons for mergers and acquisitions
Consolidation is particularly attractive to large U.S. investors who are less familiar with the resources industry.
“When you talk to U.S. generalist investors, they want to invest in large, liquid stocks,” Markham said.
“We’ve seen consolidation across the space, we’ve had a wave of mergers and acquisitions, but I see more benefit because we need to have companies that people can actually invest in.”
