Copper Prices Surge Amid AI Demand: Is a Market Bubble Looming?

Understanding the Current Copper Boom and Its Implications

The surge in copper prices, which hit a record high of $5.80 per pound in July 2025, has many analysts drawing parallels to the late 1990s fiber optic boom driven by the rapid rise of the internet. As artificial intelligence (AI) drives unprecedented demand for data centers, John Gross, publisher of 'The Copper Journal', warns of potential market excesses reminiscent of those seen in the dot-com bubble. The increasing reliance on copper for electrical infrastructure presents both opportunities and risks for various industrial sectors, fundamentally altering supply dynamics.

The Role of AI in Copper Demand

According to an analysis by Harvard University economist Jason Furman, data centers accounted for an astonishing 92% of GDP growth in the U.S. in the first half of 2025, despite only representing 4% of total GDP. This boom fuels a staggering capital investment in AI-driven infrastructure, reaching close to $400 billion annually. Each new data center necessitates a significant copper footprint, projected to consume around 27 to 33 tonnes of copper per megawatt of installed capacity, which can total thousands of tonnes per site. Notably, sectors aimed at bolstering electricity grids to meet this demand are simultaneously stressing existing copper supplies.

Historical Lessons: Echoes of the Dot-Com Era

Gross notes striking similarities between today’s copper demand dynamics and the dot-com era’s explosive growth, where optimism soared but led to harsh corrections as supply outpaced actual market need. A miscalculation in expected demand led Global Crossing to overbuild in fiber optics, leaving the firm heavily in debt. Gross highlights that while the fervor surrounding AI and data centers resembles that euphoria, the situation remains precarious, with analysts predicting a refined copper deficit of 304,000 tonnes for 2025. The historical context serves as a cautionary tale, emphasizing the need for tempered expectations in the face of unprecedented demand.

The Challenges Facing Copper Supply

Industry experts are beginning to outline a looming supply gap in copper, with Wood Mackenzie forecasting that only about 70% of the 2035 demand can be met by current and planned mines. As legacy mining operations face declining ore grades—by approximately 40% since 1991—the ability to meet this intense demand is strained. New projects, such as the controversial Resolution Copper in Arizona, highlight the procedural delays and societal opposition that can stall production, while similar challenges abound in major copper-producing countries like Chile and Peru.

Future Projections: Demand Versus Supply

The impending copper crunch will coincide with projected demand spikes across industries, especially as AI initiatives expand. A BloombergNEF report predicts copper demand by AI facilities could peak at 572,000 tonnes annually by 2028, compounded by escalating needs from other sectors such as renewable energy. The confluence of factors, from AI infrastructure to energy needs for electric vehicles, signals a fundamental shift in how copper is utilized across industries. As a consequence, analysts expect major price volatility ahead, with peaks and dips influenced by regulatory changes, market behavior, and supply chain dynamics.

Conclusion: Navigating Uncertainty in the Copper Market

As demand for copper surges, its role as a critical material in the AI and clean energy sectors cannot be underestimated. Analysis suggests this increasing demand will raise long-term prices, yet the landscape remains fraught with uncertainties stemming from potential overreach and supply chain fragility. Stakeholders, including miners, utilities, and tech companies, must navigate these complexities to secure materials while managing the risk of future market corrections.