The CEO of one of the world's largest mining companies says investors should expect more consolidation.
The reason is that demand for copper and other key metals is soaring as artificial intelligence emerges as a key element of computing technology.
To meet global demand, Tom Palmer, CEO of Newmont Corp. (NEM) , said Thursday, companies will be forced to combine to pool resources and mineral prospects.
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AI, he said, has shaken up mining companies in part because of the huge power demands needed to power the incredibly sophisticated chip systems.
"It's quite remarkable to see that move in AI that we didn't see even two years ago," Palmer said at an industry event in Melbourne, Australia. Newmont is the world's largest gold producer.
Technology needs metals, lots of them
Gold, silver and platinum will also be in demand. The tech industry knows how well the metals can conduct electricity and transmit data, Francois Moreau, a French-based financial writer, wrote on Kitco.com, the website of Kitco Metals, one of the largest precious-metals dealers.
In theory, that's great for Newmont.
Gold and silver already are used in the tiniest of spots in microcircuits. Platinum's great attribute is its resistance to corrosion. The same is true for gold.
Gold is up 15.5% for the year at $2,391.30 an ounce. The SPDR Gold Shares ETF (GLD) , which invests directly in gold, is up nearly 15%.
Silver is up 30.2% at $31.67 an ounce. Platinum, however, is flat on the year at $1,011.60 an ounce.
But copper is more important to AI.
It's critical to powering the machines in giant data centers, and its price per pound makes the metal much more cost-efficient in constructing the vast power lines linking power stations to the data centers.
Newmont was up 3.4%, although only a small portion of its production is gold. It's up 2.7% for the year but 18.6% in the second quarter.
Copper is up 20% this year in New York trading, closing Thursday at $4.6715 a pound. But it is off 8.5% from its May 20 closing peak of $5.106 a pound.
The U.S. Copper Index Fund (CPER) , an ETF that invests directly in the metal, is up 19% for the year. It was flat in May and so far in June.
Copper mining stocks were mostly higher on Thursday. Freeport McMoRan (FCX) , one of the world's largest copper miners, was up 1.5% Thursday and is up 20% this year.
The Global X Copper Miners ETF (COPX) was up 1.9% on the day and is up more than 26% this year. The ETF includes Freeport-MoMoRan, BHP Group (BHPLF) and First Quantum Minerals (FQVLF) , the Canadian mining company.
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The risk for Newmont and others
While the potential of AI seems enormous, metals prices and, of course, metals stocks are subject to market forces. Price movements in recent weeks may be telling investors to consider whether gold and copper prices are getting ahead of themselves.
Carley Garner, a Nevada-based commodities trader and contributor to TheStreet Pro, thinks the answer is yes, especially about copper.
Its big runup this year into May has not been something one normally sees with the metal. And that makes the market vulnerable to a bigger selloff than we usually see.
Garner also offers this warning to the stock market: Copper's peaks tend to precede market tops. And be advised: The big selloff that began after May 21 "could be a warning signal for the stock rally."
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