AI Spending Concerns and Stronger Dollar Deal Double Blow, BHP Drops Over 10% in a Single Week
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BHP fell more than 10% from its all-time high in a single week as doubts over AI data-center spending collided with the dollar hitting a one-year peak, dragging the world's biggest miners lower — though analysts say the long-term thesis remains intact.
What triggered this sell-off in mining stocks?
BHP steadied in Sydney on Friday but still closed the week more than 10% below its June 17 record high. Rio Tinto, Glencore, and Anglo American all fell in tandem.
Two catalysts converged: tech stocks slumped on fears over the massive borrowing and capex needed for data centers, dragging mining's AI-linked narrative with them; meanwhile the dollar index hit a one-year-plus high, weighing on dollar-denominated commodity demand.
This means → miners absorbed both a growth-narrative wobble and a currency headwind at once. Either alone might be digestible; the two together triggered a stampede-style pullback.
When did miners become AI plays?
BHP has made copper its core growth bet, wagering on massive demand from data centers and their supporting power grids. Copper now accounts for more than 50% of BHP's underlying earnings — a first.
Justin Lin, investment strategist at Global X ETFs, said this shift "moved BHP's earnings base from one tightly linked to China's property and infrastructure cycle to a long-term demand story built around electrification, AI, and grid buildout."
In plain terms = buying BHP used to be a bet on China building apartments; now it is a bet on the world building data centers. The underlying logic changed, but the commodity — copper — did not.
Lin added that Australian domestic investors lack direct channels to play the AI theme, making BHP an almost default AI-exposure proxy.
How does a stronger dollar hurt miners?
New Fed Chair Kevin Warsh struck a hawkish tone at his first rate meeting, fueling expectations of a rate hike within months and pushing the dollar index to a one-year-plus high.
Morgan Stanley noted that the strong dollar unsettled investors who had piled into the "de-dollarization trade" — a strategy favoring physical assets like gold over currency assets.
This means → a stronger dollar directly raises procurement costs for buyers using other currencies, creating a demand-side headwind for dollar-priced copper, iron ore, and other commodities.
Morgan Stanley, citing client feedback: "The Fed's hawkish surprise was not on anyone's checklist; until things settle, mining stocks may remain in the penalty box."
Is the long-term thesis actually broken?
Darko Kuzmanovic, senior portfolio manager for global natural resources at Janus Henderson, said: "The fundamental thesis has not changed, despite short-term volatility."
Beyond AI, he pointed to electrification, decarbonization, and deglobalization as positive drivers for the mining sector, adding: "Looking at how these stocks behave, every dip gets bought."
This week's pullback erased only a small fraction of this year's gains — BHP and Rio Tinto have hit multiple all-time highs in Sydney this year, while Glencore and Anglo American have posted strong gains in London.
What should investors watch next?
Whether miners can resume their rally hinges on one thing: can capex expectations from AI hyperscalers stabilize?
This means → the upcoming earnings season is the key validation point — if tech giants confirm data-center buildout is on track, the copper-demand narrative can regain its footing.
In plain terms = mining stocks' fate now largely hangs on the capex numbers Microsoft, Google, and their peers report next quarter.
Content is for reference only, not financial advice.