Silver, AI and next-generation demand

Silver’s structural supply deficit could make the metal a critical constraint on the planned expansion of AI infrastructure and support a selective investment case for silver and mining equities.

• Silver serves both monetary and industrial purposes, with slightly more than half of production used industrially; demand has exceeded mine supply for six consecutive years, creating a cumulative deficit of about 24,000 tons.
• Mine production rose 3% last year while industrial demand fell 2% because of lower solar-cell output, but total demand still exceeded mine supply.
• Silver is used in photovoltaic cells, electric vehicles, charging points, data centers, computing hardware, power management, cooling, networking, and electricity infrastructure.
• Amazon, Meta, Microsoft and Alphabet plan to increase AI infrastructure spending to $745bn this year from $410bn last year; the US has 2,056 data centers, with about 4,000 additional sites planned or announced and 809 under construction.
• The International Energy Agency expects data-center electricity demand to roughly double over the next decade, with US data centers consuming 9.3% of national power by 2030, versus 2.9% in Europe and 2.3% in China.
• Jupiter’s monitored silver miners trade at an average of 1.26 times net asset value, below their 2018 valuation, while the authors argue that mine supply cannot be increased meaningfully in the near term.

Takeaway: Investors should remain positive but selective on silver, gold and mining equities because AI-related demand could deepen deficits, while prices and mining operations remain exposed to interest rates, inflation, macroeconomic conditions and geopolitical events.