How the AI Frenzy is Reshaping the Global Commodity Supercycle?

Barclays believes that the AI investment frenzy is giving rise to a global supercycle in commodities, which signifies significant opportunities for investors.

According to the news from the trend trading desk, on November 19, Barclays Research published a report stating that with the continuous upgrade of AI infrastructure, the demand for specific minerals and rare earth elements will surge sharply, bringing years of investment cycle dividends to mineral-exporting countries.

The report emphasizes that among all commodities driven by AI, the demand for copper is the most prominent. Mining-exporting countries such as Chile, Peru, the Democratic Republic of the Congo, and Australia will experience years of investment prosperity, which is expected to strengthen their sovereign currency exchange rates.

(Left image: Copper miners will benefit the most, right image: Mining-exporting countries will also benefit from the AI investment wave)

Barclays points out that the rare phenomenon of rising copper prices coexisting with weak oil prices is a significant trade condition boon for countries that import oil but export metals (such as Chile and Peru), providing additional support for their currencies.

AI Investment Drives Explosive Growth in Commodity Demand

The speed of AI infrastructure construction determines the pace of technological advancement, and this construction process heavily relies on specific minerals and rare earth elements, making commodities increasingly the focus.

The report estimates that capital expenditures by hyperscale cloud service providers will exceed $2.5 trillion over the next five years. Analysts believe this figure may even be underestimated, as estimated data is often a lagging indicator and does not include non-hyperscale enterprises and private companies.

Related commodities such as energy, electricity, electrical infrastructure, cooling and heat management, semiconductor and hardware investments, as well as data center construction materials will benefit from this round of AI investment cycle.

Copper is the most prominent beneficiary commodity, followed closely by silicon, with rare earth elements, battery metals (lithium, cobalt, nickel), platinum group metals, and aluminum following.

The International Energy Agency (IEA) 2025 Critical Metals Outlook report calculates that over the next 15 years, new investments of $500 to $600 billion will be needed for copper, lithium, nickel, and cobalt alone to meet current expected demand, with copper accounting for half of the capital expenditure demand.

Similar to AI capital expenditures, these figures may also be underestimated, especially for copper demand.

The depreciation of GPU/AI chips is relatively fast, and considering the pace of technological advancement, this process may accelerate. The same applies to power and cooling systems, where replacement demand will bring continuous, incremental replacement demand, rather than just one-time construction demand.

Mineral-Exporting Countries Enter Years of Investment Cycle

Barclays believes that in this arms race for computing power, mineral-exporting countries located upstream in the supply chain are in a "sweet spot."

Analysts believe that from the perspective of copper mines, Chile, Peru, and the Democratic Republic of the Congo (DRC) are in the most advantageous position. Especially in Chile, not only is it the largest copper mining country, but its mining investment has rebounded in the past two years, and future project commitments are also increasing. Argentina, with its vast undeveloped reserves, is also expected to join this club.

From the perspective of exports of other minerals and rare earth elements, Australia, Indonesia, and Brazil will also benefit significantly.

It is worth noting that although mineral extraction is distributed globally, China dominates the refining sector, processing nearly 50% of the world's refined minerals. This pattern is unlikely to change in the short term, meaning that global trade ties with China will remain close.

Insights from Historical Commodity Boom Cycles

Barclays reviewed the commodity boom periods led by China in the early 21st century (2002-2007 and 2010-2014), revealing several key patterns from historical experience.

First, the total fixed capital formation of commodity-exporting countries increased significantly, becoming an important contributor to GDP growth. During this period, copper, steel, and oil prices increased by over 300% in the first phase, while the price increases for iron ore and aluminum, although lagging, were also considerable.

(Investment has been an important factor driving economic growth during commodity boom cycles)

Second, the trade balance improved overall. In the early stages of the cycle, although investment led to an increase in capital goods imports, strong export growth was sufficient to cover and significantly improve the trade balance. This improvement was particularly notable in countries with a high proportion of mining exports, such as Peru and Chile.

(Countries with a high proportion of mining product exports saw the most significant improvement in economic performance)

Data also shows that the high growth of exports is significantly positively correlated with the appreciation of the real effective exchange rate (REER) in the following year, and this correlation is stronger during commodity bull markets.

(Export growth is positively correlated with the rise in the real effective exchange rate)

Decoupling of Copper and Oil Creates Additional Opportunities

One of the most significant and distinctive features of this cycle is the decoupling of copper and oil prices.

Traditionally, as indicators reflecting the global economic situation, copper prices have been highly correlated with oil price trends. However, in recent years, due to increased oil supply from non-OPEC countries such as the United States and Brazil, as well as the substitution effect of natural gas, this correlation has broken down.

(Recently, the correlation between copper prices and oil prices has weakened) Analysis suggests that this is an extremely important signal for investors.

For economies that are both major exporters of key minerals for AI and net importers of oil, such as Chile, Peru, Australia, and South Africa, this "decoupling" is a significant boon.

This means that while they enjoy a surge in revenue from exports of commodities like copper, they do not have to bear the cost pressure from rising import costs due to synchronized oil price increases. As a result, the trade conditions of these countries will receive an "additional boost," providing stronger support for their currencies than in any previous cycle.

(Improvement in trade conditions will bring additional strong momentum to the foreign exchange market)

The report takes Chile as an example, where trade conditions are fundamentally dependent on the relative prices of copper and oil.

Since 2024, as copper prices have risen and oil prices have fallen, the improvement in trade conditions has been accompanied by a strengthening of the Chilean peso. This indicates that a new macro landscape driven by AI, which structurally benefits the currencies of specific countries, is taking shape.

Based on historical experience and the current trend of AI investment upgrades, the Chilean peso, Peruvian sol, and Australian dollar are expected to perform well with the support of the decoupling of copper and oil.

The report emphasizes that we are currently in the early stages of this commodity supercycle, and history shows that this is precisely the time when improvements in trade balance are most significant and the potential for currency appreciation is greatest