Banananomics: Water, Copper, and Electricity Surge From AI

Copper is a metal in high demand due to the energy transition towards net zero and the expanding computing resources for AI workloads.

Inputs that matter: In 2024, copper equities experienced a significant upturn, primarily driven by a series of market dynamics that include:

• Bloomberg reports that the closure of a massive mine operation in the Panamanian jungle is among the key reasons why the world is short on copper.

• In March, Chinese smelters reduced output amid a concentrate shortage, leading to another price increase.

The opportunity: Beyond immediate market mechanics, copper's role in powering AI technology and supporting green energy transitions underscores its long-term value.

• Copper has the highest electrical conductivity rating of all non-precious metals.

Zoom in: "Tight copper mine supply is increasingly constraining refined production: the much-discussed lack of mine projects is finally starting to bite," Bank of America wrote last week in a note announcing that the "copper supply crisis is here." 

• The metal ore's spot price has climbed more than 11% this year, reaching a high not seen in over a year.

Between the lines: AI use is surging astronomically around the globe, requiring vastly more energy to make AI-supported semiconductor chips and causing a gigantic explosion in data center construction.

• Sam Altman, CEO of OpenAI, warns that AI is creating a "catastrophic energy crisis."

• ChatGPT alone uses half a million kilowatt-hours per day.

• Data centers and chip manufacturing facilities, which are already sucking up water and energy at unsustainable rates, are about to multiply across the world due mainly to AI, likely triggering energy and water wars between corporations and communities.

• However, a more significant concern is the water usage required for these data centers.

Follow the money: AI data centers and power plants require massive amounts of water for cooling.

• Training an AI at the computing level of a human brain for one year requires over 33,000 gallons of water.

• Water use in data centers is grossly underestimated—for example, Microsoft's Dutch data center consumed four times its initial plans.

• For example, “Taiwan, responsible for 90 per cent of the world’s advanced semiconductor chip production, has resorted to cloud seeding, water desalination, interbasin water transfers and halting irrigation for 180,000 hectares to address its water needs.”

Last month, India cut import taxes on electric vehicles (EVs) for global carmakers, which committed to investing $500m (£399m) and starting local production within three years.

Inputs that matter: Tesla CEO Elon Musk will visit India next week, following discussions India's Prime Minister, Narendra Modi, had with Nvidia's Jensen Huang, Apple's Tim Cook and Alphabet's Sundar Pichai last year.

• Tensions between Washington and Beijing have also pushed U.S. conglomerates to diversify their manufacturing bases to countries including India to avoid disruptions from any potential conflict.

The opportunity: According to Reuters, SpaceX is building hundreds of spy satellites under its Starshield division as part of a $ 1.8 billion classified contract.

• SpaceX and Northrop Grumman occasionally conduct classified payload missions to space. The latest, NROL-174, is scheduled to launch later this month.

• Musk, who will meet Modi during this visit to India, is expected to make several significant announcements, including the launch of Starlink and investments of over $2 billion in India.

• The government has invited the founders of space startups Agnikul Cosmos, Bellatrix Aerospace, Skyroot Aerospace, Dhruva Space, Pixxel, SatSure, and Digantara to meet Elon Musk in New Delhi on Monday.

Zoom in: In 2023, India became the fourth nation to land a spacecraft on the Moon successfully.

• Gen. Stephen Whiting of the U.S. Space Command said, "Frankly, China is moving at a breathtaking speed."

• "Since 2018, China has tripled their on-orbit intelligence, surveillance, and reconnaissance satellites."

• "And with these systems, they've built a kill web over the Pacific Ocean to find, fix, track and, yes, target United States and allied military capabilities."

Between the lines: "The story of Apple, such a marquee name, has worked in Modi's favor – not only has it helped the economy, but it has also given him political swagger," said Pravin Krishna, Chung Ju Yung distinguished professor at Johns Hopkins University.

• Gurbir Singh, author of The Indian Space Program: India's Incredible Journey from the Third World towards the First, explains, "Similar programs have influenced the Moon mission and many other ISRO space programs in China."

Follow the money: DefenseNews reports, "India plans to spend about $3 billion on space-related contract awards over the next few years to reduce its dependence on foreign satellites and bolster its counter-space capabilities."

• The reason for India's move into space is "space situational awareness."

• SpaceNews reports, "The European Space Agency, impressed with India's growing space capabilities, is exploring opportunities for enhanced cooperation in space activities."