Artificial intelligence, touted as one of the most transformative technologies, is set to reshape the world and drive significant economic growth. Analysts at Bank of America project that AI will contribute a remarkable $15.7 trillion to the global economy by 2030.
While attention often focuses on the impact AI has on daily life and downstream applications, its influence further upstream is equally profound.
The Hardware Frontier
At the forefront of AI hardware innovation is Nvidia, a company renowned for creating cutting-edge chips that power AI servers. Positioned as a top player in the AI industry, Nvidia’s stock has surged over 260% in the past year, illustrating the immense growth potential in this sector.
Nvidia, alongside key partners like Taiwan Semiconductor and competitors such as Advanced Micro Devices, form the foundation of the AI value chain. Analogous to suppliers during a gold rush, these companies supply the essential components that drive the AI revolution.
Copper’s Crucial Contribution
While silicon dominates discussions around computer chip materials, copper plays an indispensable role in enabling tech functionality. Acting like neural connections in a brain, copper facilitates the integration of semiconducting components within an integrated circuit. Additionally, it serves a vital function in power transmission within the circuit.
Beyond the realm of chips, copper is integral to the broader electrical grid infrastructure. From turbines converting mechanical energy to batteries storing power and wires transmitting electricity, copper lies at the core of modern technological operations.
Supply and Demand Dynamics
The surge in AI, electric vehicles, and decarbonization initiatives is driving an escalating need for copper. By 2031, global demand is projected to soar to 36.6 million metric tons, a significant increase from the current 25 million metric tons. However, supply is expected to fall short by 6.5 million metric tons by 2031, as per McKinsey & Company research.
The gap between burgeoning demand and dwindling supply is becoming more pronounced, with leading Chinese copper smelters recently agreeing to production cuts due to raw material shortages, underscoring the tightening supply chain.
This convergence of rising demand and constrained supply positions copper mining and processing as lucrative investment opportunities.
A Comprehensive Approach
Acknowledging these market dynamics, Ivana Delevska and the Spear Invest team have capitalized on these trends. Their flagship fund, Spear Alpha ETF, encompasses a comprehensive view of the AI value chain, spanning from direct AI utilizers like ZScaler to hardware producers such as Nvidia and upstream industry players like Freeport-McMoRan and Teck Resources engaged in copper mining and processing.
This diversified approach, incorporating industrial holdings far removed from technological applications, demonstrates a nuanced understanding of the broader landscape, reflected in SPRX’s impressive 70% growth over the past year.