Governments have started treating metals as strategic assets, while investors have yet to price in how much the AI boom depends on them, according to Olivia Markham, co-manager of the £1.7bn BlackRock World Mining Trust.
The large tech companies building AI data centres, known as hyperscalers, now spend more on capital projects than the mining sector does, she said, estimating that about a third of that money goes on energy, which needs metals such as copper to build.
“There is a massive disconnect here, and people don’t understand that the pace of AI is going to be very dependent on [not only] the pace of the energy buildout, but also the pace and build-out of certain metals like copper,” she said.
“So, we are going to have to continue to keep these commodity prices high to try and keep up with the hyperscaler race.”
Commodities have had a bumper year in 2025 and prices have stayed elevated into 2026. In August this year, the 10 best-performing funds in the Investment Association universe were those focusing on precious metals miners, particularly gold.
But Markham said governments are looking at a different group of metals to investors: rare earths, which are used to make the powerful magnets inside electric vehicles, wind turbines and military equipment.
“China has a complete stranglehold on this market, and when it came to trade negotiations with the US 12 to 18 months ago, [China] used it as a weapon,” she explained.
China was able to get better trade terms on the threat that it would no longer export rare earths to the US. That had the direct impact of shutting down a Ford automotive factory in America, Markham added, and the US has since committed $12bn to Project Vault to build its own source.
“All of a sudden, you can no longer rely on certain countries for your commodity supply. Think about what has happened in Russia, what is happening in China. So people want – particularly for those really critical metals – to bring those sources back home,” she said.
“As you look to do that, it is going to cost more money. It is going to take time, and it is going to require a lift in commodity prices to sustain that.”
Markham didn’t expect a slowdown in spending on AI, power or the electricity grid, as the risk of being behind is too great – another thing the debate in the West is overlooking.
“What you often read is what is happening in the US. You really also need to look at what is happening in China. It has spent an incredible amount and are really winning the race in terms of the energy base they have from all of their renewable infrastructure,” she said.
The manager estimated that about a third of what the large tech companies building data centres, known as hyperscalers, spend, goes on energy. Their capital spending is now even heavier than the mining sector’s, and that is where metals demand comes in.
This is where the bottleneck lies, as mining capital spending, adjusted for inflation, remains 40% below its 2011 peak. Much of this is used for keeping existing mines running rather than adding output.
This means that copper is heading for its first year of negative supply growth in 2026, said Markham, a view that was reinforced when she visited a number of copper mines in Chile and Argentina this year that are getting deeper and costing more to run.
“It is just tougher and, because we haven’t had exploration success over the past 10 years, I don’t see the pipeline of these new projects coming in,” she said.
“It is cheaper to buy a listed company at a premium than to build a mine, a process that takes the best part of 15 years from discovery to production.”
Mining is less than 2% of the MSCI AC World index, and the sector still trades “below its historical average valuation” across a full cycle. Copper shares are the exception.
“If we moved into a weaker demand scenario, copper wouldn’t be immune to that. The real opportunities are probably away from your headline big company producers that people know about. It’s starting to get down into that next mid-cap group,” she concluded.