Goldman Sachs: AI infrastructure expectations now drive copper prices

Goldman Sachs analysts have identified a structural shift in the copper market, reporting that expectations for artificial intelligence infrastructure investment have become the primary driver of price gains since early 2025. The bank argues that investor sentiment is increasingly anchored to future capital expenditure on data centres, electrical grids, and transmission lines, rather than current physical consumption alone. This narrative has overtaken traditional macroeconomic indicators, such as China’s growth outlook and movements in the US dollar, as the largest contributor to the metal’s cumulative price appreciation.

The demand profile for copper is expanding beyond its historical role as a barometer of global manufacturing. While data centres currently account for only approximately one per cent of global copper demand, the physical requirements for the AI ecosystem are substantial. The build-out necessitates extensive electrical wiring within facilities, alongside transformers, switchgear, and high-voltage transmission infrastructure to deliver power to these hubs. Goldman Sachs commodities strategists, led by Lavinia Forcellese, stated that AI has become a key narrative shaping expectations for future power, grid, and copper demand.

Hyperscalers are central to this investment thesis, with Microsoft, Meta, Amazon, and Alphabet having pledged hundreds of billions of dollars toward AI infrastructure. This capital commitment is driving utilities to race to expand generation and transmission networks. Bank of America estimates that the United States could face an electricity generation shortfall of 100 gigawatts between 2026 and 2030. During that same period, electrical capacity demand is projected to reach 230 gigawatts or more, driven by booming chip production and the energy intensity of artificial intelligence workloads.

Despite the dominance of the AI narrative, China remains the world’s largest consumer of copper, accounting for roughly half of global demand. However, the physical market has tightened significantly, supporting prices alongside speculative demand. Visible copper inventories in China have fallen toward the bottom of their seasonal range, while tighter enforcement of scrap regulations has pushed manufacturers toward refined copper. Smelter maintenance has further constrained cathode output, leaving the market with limited inventory cushion.

Supply-side disruptions have exacerbated the tightness in the physical market. The closure of the Cobre Panamá mine has kept approximately 330,000 to 350,000 metric tons of annual supply, representing 1.5 per cent of world supply, offline. Additionally, shortages of sulfuric acid, linked to the war in Iran, have forced global smelters to curtail production. Major seismic activity at Ivanhoe Mines’ Kamoa-Kakula complex in the Democratic Republic of Congo in 2025 has also continued to disrupt operations.

Policy uncertainty adds another layer of complexity to the market landscape. Anticipation of potential levies on refined copper imports has already reshaped trade flows, with metal being pulled into the United States in dramatic fashion. Futures markets are currently pricing in roughly a 30 per cent probability of a 15 per cent tariff on refined copper from the White House by January 2027. Jefferies analysts noted that supply growth is expected to remain slow due to depletion and grade declines, maintaining a bullish outlook given the convergence of growing global demand and serious supply constraints.