Buying Copper Futures: An AI (AGI/ASI) Investment?
Some think that investing in copper futures may be a smart investment with AGI/ASI on the way... but does this make logical sense?
Someone on X/Twitter tweeted that it might make a lot of sense to just buy copper futures if you expect the development of AI to continue at a rapid rate with the inevitable inception of AGI/ASI – and some pretty smart people agreed that this could be a good play.
I should note that I am not planning on buying copper futures as of current – I just wanted to think through the logic of this potential investment.
What’s the logic behind buying copper futures in 2024?
The bull case for copper futures has to do with:
Increased compute for AI models (data centers are copper-intensive)
Tech growth (EVs, renewables, robotics, etc.)
Smart cities & IoT expansion (require copper for connectivity)
Declining ore grades, regulations, limited supply of copper
Market dynamics (speculating high future demand & inflation hedge)
1. AI development requires computational power
GPUs & data centers: AI development relies heavily on advanced computational hardware, primarily GPUs (Graphics Processing Units). Companies like NVIDIA, which produce these GPUs, have already seen substantial growth due to AI demand. These GPUs and the data centers that house them require extensive wiring and components made from copper due to its excellent electrical conductivity and thermal properties.
Increased demand for copper: As AI models become more complex and require more computational power, the demand for data centers and GPUs will increase. This, in turn, will drive up the demand for copper used in these technologies.
2. Electric vehicles (EVs) & renewable energy (synergism)
EV growth: The growth of electric vehicles is synergistic with AI development. AI technologies are integral to the advancement of autonomous driving, which relies on extensive use of sensors, processors, and connectivity solutions, all requiring copper.
Renewable energy infrastructure: AI is also critical in optimizing renewable energy systems (solar, wind). These systems require substantial amounts of copper for their construction and operation, from the wiring in solar panels to the coils in wind turbines.
3. Industrial & tech use (smart cities & IoT devices)
Infrastructure development: Smart cities, powered by IoT (Internet of Things) devices and AI, will need extensive wiring, sensors, and connectivity solutions, all of which use copper. The development of these technologies will drive long-term demand for copper.
Advanced manufacturing: AI-driven manufacturing and robotics also require significant amounts of copper for electrical components and machinery.
4. Supply constraints & market dynamics
Declining ore grades: Copper mining faces challenges such as declining ore grades, which make extraction more costly and less efficient over time. This could constrain supply and put upward pressure on prices as demand increases.
Environmental regulations: Stricter environmental regulations can limit the expansion of mining operations, further constraining supply.
5. Speculation & inflation hedge
Speculative investment: If investors anticipate that AI development will drive up copper demand, they may start buying copper futures in anticipation, which can drive up prices even before the actual demand materializes.
Hedge vs. inflation: Commodities like copper often serve as a hedge against inflation. If AI development leads to significant economic growth and inflationary pressures, copper futures could be an attractive investment.
Potential effects of AGI/ASI on copper demand/prices
AGI/ASI has potential to initially drive massive increases in demand for copper – followed by possible reduction in demand (due to recycling advances, inventions of new materials, etc.).
Potential increased demand
Electronics & Computing Hardware
Circuitry: Copper is extensively used in electrical wiring and circuit boards due to its excellent electrical conductivity. Advanced AGI and ASI systems will require powerful computing hardware, which relies heavily on copper for efficient electrical connections.
Semiconductors: Copper is crucial in semiconductor manufacturing for interconnects, which are essential for high-performance computing chips used in AGI applications.
Data Centers
Networking: Data centers, critical for AGI operations, use vast amounts of copper for networking infrastructure, including cables and connectors.
Cooling Systems: Copper is used in heat exchangers and cooling systems in data centers due to its excellent thermal conductivity, which helps manage the heat generated by powerful AGI computing resources.
Robotics
Motors & Actuators: Copper is a key component in the motors and actuators used in robotics, which are integral parts of AGI systems that interact with the physical world.
Smart Infrastructure
Smart Cities: AGI technologies will facilitate the development of smart cities with interconnected infrastructure, relying heavily on copper for electrical and communication systems.
IoT Devices: The Internet of Things (IoT) ecosystem, enhanced by AGI, will see an increase in the number of connected devices, all of which use copper in their electronics.
Energy Systems
Renewable Energy Integration: AGI could optimize renewable energy systems, requiring extensive copper for electrical grids, energy storage systems, and renewable energy installations like solar panels and wind turbines.
Potential decreased demand
Material Innovation
Development of Alternatives: AGI could accelerate the discovery and development of new materials that can replace copper in various applications. These materials might offer similar or superior properties, reducing the reliance on copper.
Enhanced Material Properties: AGI could improve the properties of existing materials, making them more efficient or versatile, which might substitute copper in certain uses.
Efficiency Improvements
Optimized Copper Usage: AGI systems can design more efficient electronic and electrical components that use less copper without compromising performance. This optimization can lead to a reduction in copper demand per unit of technology.
Advanced Manufacturing Techniques: Innovations in manufacturing processes could allow for more precise and efficient use of copper, minimizing waste and reducing overall consumption.
Recycling Advances
Enhanced Recycling Technologies: AGI could develop new and more efficient recycling technologies, increasing the recovery rates of copper from electronic waste and other sources. This would supplement the supply of recycled copper and reduce the need for newly mined copper.
Circular Economy Models: AGI could facilitate the implementation of circular economy models, where products are designed for easy recycling and reuse, further decreasing the demand for raw copper.
How did copper prices change in the past 10 years (2014-2024)?
The prices mentioned are average annual prices for copper futures contracts on the COMEX exchange.
If you’d have purchased copper in 2014 and held until 2024, you’d have a total % ROI ~32% (which is pretty terrible) – you could’ve done better just keeping money in a high-yield savings account.
If you’d have invested in QQQ for this same time period, you’d have earned nearly 8-fold more than investing in copper… copper was a downright brutal investment for the past decade.
2014 - $3.11/lb: Copper prices were relatively stable, supported by steady demand from China and other emerging economies. However, concerns about China's economic slowdown and a stronger U.S. dollar put some downward pressure on prices.
2015 - $2.49/lb: Copper prices declined significantly due to a combination of factors, including slowing economic growth in China, a stronger U.S. dollar, and oversupply concerns. China's stock market turbulence and currency devaluation also contributed to the bearish sentiment.
2016 - $2.21/lb: Prices remained under pressure during the first half of the year due to ongoing concerns about China's economic slowdown and a stronger U.S. dollar. However, prices rebounded in the second half, supported by improving global economic sentiment and supply disruptions.
2017 - $2.80/lb: Copper prices rallied, driven by robust global economic growth, particularly in China, and supply concerns related to labor strikes and disruptions at major mines. The electric vehicle revolution and renewable energy investments also started to gain traction, supporting copper demand.
2018 - $2.96/lb: Prices continued to rise in the first half of the year, supported by positive global economic sentiment and supply concerns. However, the U.S.-China trade tensions escalated in the second half, causing prices to retreat from their highs.
2019 - $2.72/lb: Trade tensions between the U.S. and China continued to weigh on copper prices, as did concerns about a global economic slowdown. However, supportive monetary policies from major central banks and hopes for a trade deal helped limit the downside.
2020 - $2.80/lb: The COVID-19 pandemic caused a sharp decline in copper prices during the first quarter as global economic activity slowed down. However, prices rebounded strongly in the second half of the year, supported by massive stimulus measures, a weaker U.S. dollar, and a faster-than-expected recovery in China.
2021 - $4.23/lb: Copper prices surged to record highs, driven by a combination of robust demand recovery, particularly in China, supply disruptions, and a weaker U.S. dollar. The accelerating energy transition and infrastructure spending plans also boosted sentiment.
2022 - $3.99/lb: Prices remained elevated but experienced some volatility due to the uneven global economic recovery and concerns about inflation. Supply chain disruptions and the ongoing energy transition continued to support prices.
2023 - $3.86/lb: Copper prices moderated slightly as global economic growth stabilized and supply conditions improved. However, the long-term demand outlook remained positive, driven by the accelerating adoption of electric vehicles and renewable energy technologies.
2024 - $4.11/lb (average up to May): Prices have been supported by the ongoing global economic recovery, infrastructure spending, and the accelerating energy transition. However, some uncertainty persists due to geopolitical factors and the pace of monetary policy normalization.
How much will copper increase in value from 2024-2034? (Estimation & probability)
I consulted both Claude 3 Opus and GPT-4o to estimate how much they think copper is likely to increase in value (based on everything they know, current trends, etc.) from 2024 to 2034.
Claude 3 Opus prediction: $6.50-$7.50/lb. (65% odds) (2034)
Claude thinks that with the global trend towards renewable energy and sustainable infrastructure, copper demand will increase – but there is uncertainty regarding tech advancements, economic conditions, and geopolitical events that may impact copper demand.
Renewable energy (solar, wind, EVs), urbanization and infrastructure development, inflation & weakening of U.S. dollar, and possible supply constraints may drive price up.
Advancements in alternative tech, recessions or economic cooling, and increases in copper production may limit price spikes.
GPT-4o prediction: $5.52-$6.70/lb. (50% odds) (2034)
GPT-4o thinks that copper demand will increase with EV adoption, renewable energy projects, urbanization (smart grids & infrastructure), and other tech advances.
GPT-4o acknowledged that supply constraints, geopolitical risks, slowed economic growth, inflation, alternative materials, recycling improvements, etc. may prevent major increases in copper prices.
Both of these AIs think similarly and were probably trained somewhat similarly – so it’s not surprising to see that they make similar price predictions (slightly more optimistic prediction for Claude than ChatGPT).
Will an increase in copper prices be significant enough to make up for lost investment opportunity elsewhere (2024-2034)?
Unknown. Perhaps the value of copper significantly increases, but that your money would’ve been better invested in major tech companies (e.g. NVIDIA, Google, Microsoft, Apple, Amazon, etc.), cryptocurrencies (BTC, ETH, SOL), biotech companies, EV companies, etc.
It is more likely that if a person buys major cryptocurrencies (e.g. BTC, ETH, SOL, etc.) during “extreme fear” following a major crash – they have significantly higher potential to outperform copper in less than a 10-year window (probably in less than a 5-year window).
Companies that are making use of copper (innovating with the copper) will likely generate more value than pure copper itself.
Do I think copper futures is an ideal investment for the future?
No. And I could be dead wrong… I’d rather take some risk with tech companies, biotech, crypto, and EVs/alt energy, etc.
I do think that copper is likely to increase in value over the next decade by a fair amount – but this increase could be attenuated by:
Increased copper recycling
Efficiency improvements in copper usage
Potential oversupply from mining projects
Delays in adoption of EVs
Energy transition challenges
Tech advancements in copper substitution
Regulation cuts
Geopolitical factors & trade tensions
Realistic best case scenario I would estimate that copper value increases 100-200% from 2024-2034. The rationale is as follows:
Widespread AI (AGI/ASI), EVs, renewables, and smart infrastructure (IoT).
Persistent supply constraints due to declining ore grades and stringent environmental regulations.
Limited development of alternative materials and recycling tech that could substitute or reduce copper use.
Strong global economic growth, industrial expansion, etc.
Increased speculative investment in copper futures for a variety of reasons.
The most realistic scenario I would estimate that copper value increases 50-80% from 2024-2034. The rationale is as follows:
Steady growth in AI, EVs, renewables, smart tech – but at a moderate pace (not insane acceleration).
Some improvement in copper recycling and efficiency usage – offsetting demand increases.
Gradual economic growth with some slowdowns.
Balanced supply and demand dynamics without major disruptions.
Realistic worst case scenario I would estimate that copper value increases 10-30% from 2024-2034. This would assume the following:
Tech & economic factors limit the growth in copper demand with improved recycling and substitutes – reducing the need for new copper.
Frequent economic challenges that suppress industrial demand for copper – keeping prices stable.
Increased supply from new mining projects meet any demand increases, preventing significant price spikes.
What do you think about investing in copper as an indirect AI play?
Do you think buying copper futures is a smart speculative play on AI, AGI, ASI development?
Or do you think the price of copper won’t increase as much as people think due to increased efficiency & recycling, development of alternative materials, economic slowing, tech shifts & innovations, etc.?
Do you think an investment in copper futures will prove better (% ROI) than an investment in major tech companies, cryptocurrencies, biotechs, EV companies (e.g. Tesla), etc.? (Explain your thinking)