Nvidia's pivot to copper cables from optical fiber for data transmission over short distances in AI data centers signals a major increase in copper demand ahead, Wall Street analysts say. The trend could boost copper stocks.
At its GTC conference last week, Nvidia announced an increased use of copper in its artificial intelligence computing systems. Nvidia made the move to cut the power usage in its data center gear.
"Exponential AI computing capacity growth this decade … will require exceptional global power capacity growth," JPMorgan analysts said in a client note Thursday.
In its base case, the International Energy Agency estimates that global data-center power demand will increase at a 15% compound annual growth rate to 2026. JPMorgan estimates that this growth rate would require about 2.6 million metric tons of cumulative new copper demand by 2030. It also would translate to about 2% of expected global copper demand in 2030, the firm said.
This new demand for copper comes against an already forecast supply gap of 4 million metric tons by 2030, JPMorgan said. The growth of battery electric vehicles and renewable energy plus limited new copper mine supply are behind the predicted shortage, it said.
Copper Stocks In Focus
JPMorgan highlighted three companies as regional picks among copper stocks. It called Teck Resources its "top pick" in North America. It also selected Anglo American and Sandfire, which is traded on the Australian Securities Exchange.
Other major copper stocks include Freeport-McMoRan and Southern Copper.
Investor's Business Daily added Freeport-McMoRan to its SwingTrader list on Thursday.
Nvidia Aims To Cut Power Usage
Nvidia's shift to copper from optics was a major topic of discussion earlier this week at the Optical Fiber Communication 2024 conference in San Diego, Evercore ISI analyst Amit Daryanani said in a client note Wednesday.
"Nvidia's recent announcement that they plan to use a significant amount of copper to network GPUs at distances of less than 1 meter was the subject of significant debate, but the power and cost benefits make it clear copper will be used as much as possible," Daryanani said.
Nvidia noted that using copper instead of optics saves 20 kilowatts of power per server rack.
"A key enabler of using more copper is liquid cooling, which allows more GPUs (graphics processing units) to be packed into a single rack," he said.
Of the major copper stocks listed here, Southern Copper has been the best performer lately. It has an IBD Relative Strength Rating of 89 out of 99.
On March 13, Southern Copper stock broke out of a flat base at a buy point of 88.40, according to IBD MarketSurge charts. On the stock market today, Southern Copper stock rose 2.1% to close at 106.52.
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