The rush to build artificial intelligence (AI) data centers is more than a technology investment story, it’s also about the metals to build them and the power to drive their servers.
That’s why Olivia Markham, one of the world’s most important resource investors sees a budding mining boom.
Portfolio manager, alongside Evy Hambro, of the $10 billion BlackRock World Mining Fund and World Mining Trust, Markham told a mining conference in the Australian city of Perth earlier this week that mining companies were struggling to keep up with demand for their minerals and metals.
“Commodity demand is simply accelerating, and the commodity intensity of gross domestic product growth continues to rise,” she said.
‘The AI story is as much a power and metal story as it is a technology story.”
But Markham believes not enough investors recognize the direct link between AI and the commodities world.
Goldman Sachs Agrees
A similar point was made a few days earlier by investment bank Goldman Sachs in a research report into the demands of Agentic AI.
“Current digital infrastructure is unlikely to sustain Agentic AI in our view,” Goldman Sachs said.
“These autonomous, always-on systems are 60-to-130 times more energy intensive than AI chatbots, necessitating a total rebuild of the physical architecture beyond just data centers.”
Copper and aluminum are the two metals riding highest on the data center building rush with big copper miners such as BHP and Rio Tinto enjoying sharp share price increases.
BHP is up 36% this year, including 13% in the past month. Rio Tinto has risen by 25% this year and 8% in the past month.
Goldman Sachs said in its report titled ‘Investing in the Architecture of AI’s future’ that investment opportunities in the technology are shifting downstream.
No AI Without Metals
“Future growth depends on ‘pick and shovel’ companies providing solutions across data centers, power transmission, advanced cooling, grid connected generation and the skilled workers to resolve the physical constraints,” the bank said.
Markham’s view is that the AI value trail goes even deeper because the pick and shovel assets nominated by Goldman Sachs cannot function without the fundamental building of minerals and metals.
Adding to the case for basic raw materials is the Persian Gulf blockade which has created a multi-commodity chokepoint at the Strait of Hormuz, she said.
Relevance
A challenge for the mining industry is relevance to global investors because many mining companies are too small to handle the demands of fund managers with billions of dollars to place.
Markham said miners needed greater scale to be relevant and that could mean the need for a fresh round of mergers at the top end of the industry such as the partially complete acquisition of Canada’s Teck Resources by London-based Anglo American.
The Case For More M&A
Consolidation would particularly appeal to big American investors who are less familiar with the resources sector.
“When you speak to a U.S. generalist investor, they want large, liquid equities to invest in,” Markham said.
“We’ve seen consolidation across the space, we’ve had a wave of M&A, but I see merit in more because we need to have companies that people can actually invest in.”
