Computing Boom and Raw Material Shortage, Commodities Welcome a Decade of Super Cycle

Jeff Currie, a veteran Wall Street strategist, suggests that the globe is at the early stage of a new commodities supercycle demand, driven by a massive upsurge in demand for AI-based computation infrastructure construction, combined with chronic long-term underinvestment in raw materials like energy and metals. The confluence of these factors could prop the cycle up for 10 to 12 years.

The global energy sector currently presents a substantial asymmetric trading opportunity, with oil companies offering a free cash flow yield as high as 15.5%, while hyperscale cloud computing firms commonly lack similarly robust cash flow. Holding onto major oil companies like ExxonMobil and Chevron appears as a direct means to partake in the uprising of energy demand from an economic perspective.

The current oil supply and demand gap is massively depleting inventory, with Brent crude surging 84% this year to approximately $112 a barrel. The gap between spot prices and forward futures prices indicates that the long-term cost structure of the crude oil market has been severely underestimated, which will exacerbate cost pressures in the future through high oil prices. Global jet fuel, European diesel and liquefied natural gas, and American gasoline all face significant supply constraints.

Concurrently, the shortage of sulfuric acid, a refinery derivative, has indirectly driven copper prices to all-time highs. AI data centers represent a highly capital-intensive system with strong physical presences, requiring massive electricity provision, semiconductor materials, and support systems like copper, aluminum, energy storage, and cooling solutions, which indeed reflect the pricing of physical limitations in the era of AI.

Research from Barclays Indicates that developing countries such as Chile, Peru, Brazil, Indonesia, and China will benefit from the AI-driven commodities boom. Chile and Peru, as copper exporters, are vital in the core wiring of power grids and data centers. Chile also has control over lithium, a core raw material in energy storage. Indonesia ranks as the largest producer of nickel, a key input for batteries and storage systems. Meanwhile, China governs rare earth magnets essential for semiconductor manufacturing and data center infrastructure. Michael Hartnett's team at Bank of America strategists also points out that the global AI race essentially intensifies the contest for energy, rare earths, and minerals. The commodities up swing will continue for years to come, and whoever seizes chips, rare earths, minerals, and high-efficiency energy sources wins the global AI war.