High tech needs low tech: AI’s power appetite and copper’s constraint

Key Points:

• Oracle's surge underscores how AI-driven cloud and data centre growth is reshaping power and infrastructure demand
• Copper sits at the heart of this story as grids expand to meet soaring electricity consumption
• A U.S. overhang of supply following the tariff-related rush to ship copper is weighing on near-term prices despite structural bullish drivers
• China demand remains robust, anchored by large-scale grid investment, aggressive electrification, and rapid expansion of strategic sectors such as renewables, EVs, and data centers.

The AI boom is fast becoming a power story. Oracle underlined this shift when its shares surged more than 40% after the company delivered an aggressive outlook for its cloud business, cementing its position in the race to support AI computing demand. Four new multibillion-dollar contracts, and a sharp upgrade to future cloud revenue expectations, showed how the software sector is being reshaped by AI-driven power needs. This highlights the broader theme: the energy required to train and run large language models and data-intensive platforms is forcing utilities and governments to rethink grid capacity. That raises the prospect of a multi-year boom in demand for conductors, transformers, and wires—in other words, copper. The metal is an unglamorous but indispensable enabler of the digital age. While investors flock to equities involved in the whole AI ecosystem, copper sits in the background as the raw material needed to turn electrons into utility.

Power hunger meets copper intensity

The International Energy Agency estimates global data-centre electricity use could almost double by 2030 to more than 900 terawatt-hours. Even if gains in efficiency temper this rise, the wide uncertainty band forces grid operators to plan for the higher end. And copper is central to every step: from transmission cables to switchgear to transformers. Grid modernisation increasingly represents a large and rising source of copper demand, and forecasts through the decade point to rising intensity of use as investment in new lines and substations accelerates.

Evidence is mounting on the ground. US data-centre construction has reached a record pace, requiring parallel build-outs of substations and transmission. In Europe and Asia, utilities are under pressure to ensure adequate capacity, not just for AI but also for electrification of transport and industry. This forms a structural case for copper demand, even if the market is currently weighed down by near-term noise.

Inventory overhang caps near-term rallies but tightness loom

In recent months, we saw large stockpile shifts to the CME-monitored warehouses in the US due to tariff speculation that saw prices for HG copper futures in New York spike to a major premium above the rest of the world. The result was ballooning—and now potentially unwanted—stockpiles in the US. If those stocks start to flow back into the global system, it will act as a short-term headwind for prices.

CME-monitored copper stocks in the US have surged to around 277,000 tonnes, compared with 158,000 tonnes on the LME and just 82,000 tonnes in Shanghai. The imbalance is striking, with the CME never before holding such a big portion of visible exchange stocks. Copper mined production is seeing modest growth driven by a few major new projects, but disruptions and bottlenecks are significant, and long-term output is forecast to struggle keeping pace with accelerating demand. The consensus for 2025–26 is that growth will stall, and supply risks are intensifying. At the same time, treatment and refining charges for smelters remain depressed, highlighting a tighter raw material balance that could limit refined surpluses in the future once trade flows have normalised.

China demands remain a key focus

China remains the single largest variable in copper, and despite a slowdown in construction, China’s copper demand remains robust, anchored by large-scale grid investment, aggressive electrification (especially in transport), and rapid expansion of strategic sectors such as renewables, EVs, and data centers. The August official manufacturing PMI stayed in contraction at 49.4, and consumer prices slipped 0.4% year-on-year, reinforcing concerns about weak demand. That said, State Grid has announced investment plans exceeding CNY 650 billion for 2025, underlining that policy and infrastructure spending continue to underpin medium-term consumption.

Refined copper imports into China improved through mid-year after a soft first half, with August imports at 2.76 million tons representing 7.4% increase compared with a year ago, with year-to-date imports of 20.1 million tons compared with 18.7 million during the same period last year.

Utilities already repricing the theme

While copper prices tread water, utilities and power equipment makers have been some of the clearest equity beneficiaries of AI’s power hunger. Over the past year, Siemens Energy has gained around 280%, GE Vernova more than 200%, Vistra about 170%, and Mitsubishi Heavy 130%. These outsized returns show how the market has already repriced baseload and flexible generation capacity as strategic assets. Earnings calls increasingly cite the need to expand grid and power infrastructure, with deal-making and new project approvals expected to remain elevated.

For copper, the linkage is straightforward. Every additional power plant, transmission line, and data-centre connection need more metal. The rally in these equities is a market signal that the underlying demand for infrastructure metals is not far behind.

Copper upside capped for now, watch USD 4.68 per pound.

HG copper has rebounded steadily since the non-tariff collapse, while LME copper, the global benchmark, remains capped below the pivotal USD 10,150 per tonne or roughly USD 4.68 on the December High Grade futures contract, a level that has acted as resistance twice in the last year. Besides the mentioned segmentation following large stockpile shifts to the US, and continued focus on China—which remains an anchor for global copper demand, accounting for over 50% of consumption—traders are also focusing on the looming prospect of US Federal Reserve rate cuts, as expectations for easing help weaken the dollar and boost investor interest in non-yielding commodities like copper.

Conclusion

The AI boom is not just about chips and servers. It is about power. And power is about copper. Investors may continue to focus on the high-flying AI names and the utilities building plants at record pace. But the metal that carries the current is the true low-tech hero in this story. Structurally, copper demand looks set to rise. Cyclically, excess stocks and mixed Chinese data keep rallies in check. That tension is where the opportunities lie.