John Carl,
Editor
Sept. 20, 2024
The price of copper is climbing and just signaled a 3-month trend reversal. Copper is once again in a bull market pattern... and there’s one big reason why.
I recently joked to a friend of mine that my biggest regret this decade is not quitting my job in 2019 to become a janitor at Nvidia.
That’s because Nvidia’s stock has soared over 3,700% since then — and the company stock options built up over a few years on even a modest Nvidia job are now worth a fortune.
At last count, 76% of Nvidia’s employees are millionaires, and 37% have a net worth of $20 million or more.
There’s a lot of money to go around, and it’s all thanks to the exploding growth in AI revenue, as you can see evidenced in the chart below.
But it’s not just Nvidia’s employees that are awash in funds from the surge in Big Tech’s obsession with AI.
It takes a lot of industrial might to support this growth, and each one of those industries upstream from AI is seeing a spike in demand.
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One of the most obvious is power consumption. Data centers can only run with more power, and as expected, AI has led to a ten-fold increase in power demand for data centers here in the US and Canada.
There’s a direct correlation between AI’s revenue growth and the need for more power.
Even further upstream, in commodities and raw materials, we’re seeing the same influence on demand.
Copper is chief among them.
It’s the primary material for AI chips, their power supplies, the power grid that supports them, and then of course all of the wires and components that connect them all together.
Copper is where the buildup in demand is increasing and intensifying — and present stockpiles aren’t enough to meet it.
The obvious question is where the copper to meet all of this demand is going to come from.
Big Tech suffers from amnesia about its troubled history in obtaining raw materials.
- We’ve seen it for silicon, when the surge in demand for solar panels destroyed the viability of the market due to silicon demand shortfalls — and then again when polysilicon supplies rebounded, embarrassing then-President Obama and his financial support of Solyndra. George Kaiser bemoaned the wrath of commodities as he watched Solyndra implode.
- We’ve seen it for lithium, when EVs suddenly needed more lithium than the world had ever produced, arousing the ire of billionaires like Elon Musk, who said that lithium mines were a “license to print money” and accused companies like Albermarle of contract extortion.
- We’ve seen it for uranium, rare earths, aluminum, and steel. The same story has played out again and again, where the rich and powerful want to build their billion-dollar pet projects, only to find supplies have run out.
AI’s dependence on copper could become the most dramatic version of this story yet.
Copper mines take years, even decades, to bring online. Up to this point, copper has been perhaps the biggest forgotten piece in the AI revolution. Once the supply encounters shortfalls we’ll see it become front and center.
In fact, the first signals have already arrived. The price of copper is climbing, and earlier this week signaled a 3-month trend reversal, shifting us into a bull market. And the Fed’s rate cut is also going to further enhance demand.
Higher copper prices are likely here to stay — and AI will be one of the primary industries affected.
But AI companies aren’t completely helpless. Thanks to their surging revenue growth, they’ve got billions to burn, and they’ve hinted at the fact that they’re willing to spend their way out of this problem.
And there’s an unexpected recipient for these billions: copper leaching.
Copper leaching technologies have been around since the 1950s. But their use has been limited by low extraction rates and capital expense. It was also considered an unnecessary extraction method back when copper was dirt cheap and plentiful.
That’s all changing.
I’ve spent the last two years researching these new innovations. In Arizona I witnessed the use of new, proprietary formulas developed by copper giant Rio Tinto.
And I’m pleased to report that this new technology has now made it possible to extract more copper than ever before. Not only does this make copper leaching a viable competitor, it’s leapfrogging traditional mining in cost and concentration. The rise in copper prices and environmental costs has changed the entire calculus.
These new copper leaching solutions will change mining forever. They can pull copper from a combination of sulfides and oxides in grades that were once considered “impossible” to mine. The majority of the world’s copper is stuck in this low-grade rock that was once the “trash” of the traditional mining industry. Thanks to copper leaching, that trash has become treasure.
Copper can now be pulled directly from this trash rock and put into sheets that are 99.99% pure.
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These incredible mining innovations will shift our supply chain back to friendly shores — raking in billions in profits, especially as prices rise even higher on escalating demand. Let me bring you up to speed on this All-American copper and why early investors will reap billions from collapsing overseas markets.
AI companies have shown a growing interest. And with the price of copper climbing, they’ve indicated that they’re willing to fund the entire operation if it can deliver the copper they need — and one copper junior is piloting the project with the help of Rio Tinto.
We’ll see if Big Tech can get it right this time. They’ve certainly got every incentive to do so: AI is their sacred cash cow, and as you’d expect, so far they’ve indicated that they're willing to do everything they can to protect it.
This is great news for us as resource investors. As history has proven, it’s the supply of raw materials that’ll make or break AI’s future. And it’s copper miners that’ll benefit the most from Big Tech’s deep pockets.
Make it your own,
John Carl
Editor, Resource Stock Digest