How is the AI boom reshaping the global commodity supercycle?

Barclays believes the AI investment frenzy is fueling a global supercycle in commodities, representing significant opportunities for investors.

According to SuiFeng Trading Desk, on November 19, Barclays Research published a report stating that as AI infrastructure construction continues to upgrade, the demand for certain minerals and rare earth elements will surge sharply, bringing years of investment cycle dividends to mineral-exporting countries.

The report highlights that among all AI-driven commodities, copper stands out for its exceptional demand. Mining-exporting countries like Chile, Peru, Congo (DRC) and Australia will experience years of investment booms, with their sovereign currency exchange rates expected to strengthen.

(Left: Copper miners benefit the most. Right: Mining exporters also benefit from the AI investment boom.)

Barclays points out that the current rare phenomenon of rising copper prices coexisting with weak oil prices is a huge boon to countries (such as Chile, Peru) that import oil but export metals, offering these currencies extra support through improved trade terms.

AI investment drives explosive commodity demand growth

The speed of AI infrastructure construction determines the pace of technological progress, and this process heavily relies on specific minerals and rare earth elements, making commodities an ever-growing focus.

The report estimates that the capital expenditure of hyperscale cloud service providers alone will exceed $2.5 trillion over the next five years. Analysts believe this figure might even be underestimated, as the data used tends to lag and doesn’t include non-hyperscale and private enterprises.

Energy, power, electrical infrastructure, cooling and heat management, semiconductors and hardware inputs, as well as data center construction materials—all related commodities—will benefit from this round of AI investment.

Copper is the most prominent beneficiary, followed by silicon, then rare earths, battery metals (lithium, cobalt, nickel), platinum group metals, and aluminum.

According to the IEA's 2025 outlook report on key metals, the next 15 years will require $500–600 billion in new investment just for copper, lithium, nickel, and cobalt to meet current expected demand, with copper accounting for half of that capital expenditure.

Similar to AI capex, these figures may also be underestimated, especially copper demand.

GPU/AI chip depreciation is relatively rapid, and with the pace of technological progress, this may accelerate. The same applies to power and cooling systems; replacement demands will produce sustained, incremental substitution needs beyond one-off construction.

Mineral-exporting countries enter multi-year investment cycles

Barclays believes that, in this computing power arms race, mineral-exporting countries at the upstream end of the supply chain are in a “sweet spot.”

From the copper perspective, analysts say Chile, Peru, and Congo (DRC) are in the most favorable positions.

Chile, in particular, as the largest copper miner, has seen mining investment rebound over the past two years, with more future project commitments. Argentina may also join this club thanks to its vast undeveloped reserves.

For other mineral and rare earth raw materials, Australia, Indonesia, and Brazil will also benefit significantly.

It is worth noting that, although mining is globally distributed, China dominates in refining, handling nearly 50% of global refined minerals. This pattern will not change in the short term, keeping global trade ties with China tight.

Lessons from historical commodity booms

Barclays reviewed the commodity boom led by China in the early 21st century (2002–2007 and 2010–2014), and historical experience reveals several key patterns.

First, commodity-exporting countries’ gross fixed capital formation increased significantly, making an important contribution to GDP growth. During this period, copper, steel, and crude oil prices rose over 300% in the first phase; iron ore and aluminum increases, though lagging, were also remarkable.

(In commodity booms, investment is typically a key driver of economic growth.)

Second, the trade balance improved overall. In the early stage, although investment led to greater imports of capital goods, robust export growth was sufficient to offset and drive a significant improvement in the trade balance. Countries with higher shares of mining exports, like Peru and Chile, saw the most noticeable improvements.

(Countries with higher mining product export shares saw the greatest improvement in economic performance.)

Data also show high export growth is significantly positively correlated with real effective exchange rate (REER) appreciation in the following year, with this correlation especially strong during commodity bull markets.

(Export growth is positively correlated with increases in the real effective exchange rate.)

Copper-oil decoupling creates extra opportunity

A distinctive feature of this cycle is the decoupling of copper and oil prices.

Traditionally, as a reflection of global economic conditions, copper and oil prices have moved closely together. Recently, however, due to increased supply from non-OPEC countries such as the USA and Brazil, and substitution by natural gas, this link has broken.

(Recently, the correlation between copper and oil prices has weakened.)

Analysts view this as an extremely important signal for investors.

For economies that are both major exporters of AI-critical minerals and net importers of oil—such as Chile, Peru, Australia, and South Africa—this “decoupling” is a major benefit.

This means they can enjoy soaring revenues from exports of copper and other commodities without facing the pressure of rising import costs from oil moving in tandem. The result: their trade terms receive an “extra boost,” offering stronger support to their currencies than in any past cycle.

(Improved trade terms will provide a powerful driver for the forex market.)

Using Chile as an example, its trade terms are essentially determined by the relative prices of copper and oil.

Since 2024, as copper prices rise and oil falls, Chile’s trade terms have improved, accompanied by a stronger Chilean Peso. This indicates a brand-new macro landscape driven by AI, structurally benefiting the currencies of specific countries.

Based on historical experience and current trends in AI investment, the Chilean Peso, Peruvian Sol, and Australian Dollar are expected to perform well in the copper-oil decoupling environment.

The report stresses that we are at the early stage of this commodity supercycle, when history shows trade balances improve the most and currency appreciation potential is greatest.

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The above content is from SuiFeng Trading Desk.

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