Copper Prices Set to Surge as AI Data Center Demand Outpaces Global Supply
Copper prices are projected to surge by 2028 due to skyrocketing demand from artificial intelligence data centers and power grid upgrades, coupled with a growing global supply deficit.
Copper may not be as popular a metal as gold or silver, but it is considered a key indicator of global economic health. Over the past year, the copper miners ETF (COPX) surged by 37%, and estimates indicate that the metal is approaching a significant turning point. The combination of a surge in demand, the decline of existing mines, and delays in new supply could lead to a sharp price increase over the coming decade, particularly approaching 2028.
Big Tech Demand for Copper
The primary driver behind the surge in demand is the construction of massive data centers by major technology companies, including Alphabet, Amazon, Microsoft, and Meta. These companies are expected to spend a staggering 735 billion dollars this year on capital expenditures, the majority of which is allocated to data centers. Copper is essential for these facilities due to its high electrical conductivity and thermal efficiency, and it is used for power transmission and advanced cooling systems.
An advanced data center requires up to 50,000 tons of copper, compared to 5,000 to 15,000 tons in a standard facility. According to forecasts, the demand for copper for artificial intelligence and data centers is projected to triple by 2040. Simultaneously, upgrading the electricity grids in the United States and Europe to handle the load requires massive quantities of copper. Currently, about 44% of all globally produced copper is dedicated to the generation, transmission, and distribution of electricity.
When Will the Market Shortage Hit?
While demand is skyrocketing, global copper supply is weakening. In countries like Chile and Peru, the world's largest copper producers, ore quality is declining, and metal extraction requires more resources, which drives up costs. Solving the problem by establishing brand-new mines is a particularly lengthy process that can take between 16 and 18 years from discovery to commercial production due to regulatory approvals and high costs.
The acceleration of data center construction and the upgrade of electrical grids, alongside a lack of new mines, are expected to deepen the market deficit and drive copper prices upward toward the end of the decade.
Although the market may experience temporary relief in 2027 thanks to the expansion of existing mines and recycling, the year 2028 is expected to mark the beginning of an acute structural shortage. The acceleration of data center construction and the upgrade of electrical grids, alongside a lack of new mines, are expected to deepen the market deficit and drive copper prices upward toward the end of the decade.
