The Metals Behind the Next Big Thing

Savvy investors are always on the lookout for the next big thing – a dominant theme that drives headlines and creates profit opportunities in markets.

The problem is that by the time everyone is talking about it, it’s often too late to invest – at least at attractive prices.

The big investment storyline of 2023 has been artificial intelligence.

So-called "AI" stocks have garnered lots of attention as well as capital from investors hoping to cash in on the growth prospects of AI.

Some of these companies may be producing more financial hype than substance. AI itself has been the recipient of much hype in the media.

Critics, meanwhile, warn of doomsday scenarios where computers and robots become sentient and rebel against the commands of their human controllers.

For better or for worse, "smart" technologies will continue to expand their role and reach into our daily lives. If some Silicon Valley technophiles have their way, we’ll increasingly be working and recreating within a virtual reality metaverse.

But far from liberating us from material needs, AI-driven applications will require massive new material inputs. In particular, computer-powered electronic devices depend on strategic metals such as gold, silver, platinum, and palladium.

According to Metals Focus, an independent research firm, increased demand for computer chips that power AI will translate into "widespread support for a range of precious metals bearing components."

Metals Focus projects that demand will rise for "platinum alloys used in chip manufacturing, silver-palladium Ag-Pd multi-layer ceramic capacitors (MLCCs) in high power components, gold bonding wire in chip and memory packages, gold plating in printed circuit boards, and palladium plating on lead frame."

Yes, gold – falsely derided as a "barbarous relic" by socialist John Maynard Keynes – will play an important role in our high-tech future.

Although the technology sector makes up a relatively small proportion of overall gold demand, high-tech industries are commanding an increasingly large share of the silver market. Silver is indispensable in almost all computer and electronic applications due to its superior conductive properties.

Mining production of silver and other precious metals is failing to keep up with projected demand growth.

Plentiful supplies of critical materials are simply taken for granted by many analysts who project booms in AI, automation, electric vehicles, solar power, and other trendy investment themes.

But instead of some tech-driven growth story, the next big thing could actually be resource scarcity. Years of under-investment in mines and other extractive industries create opportunity for contrarian investors who see supply shortfalls and price spikes as very real risks going forward.

Mining companies as a group have proven to be notoriously poor investments that are fraught with risks even when market conditions are favorable for them.

By contrast, physical metals themselves entail none of the risks associated with an energy-intensive, labor-intensive, and politically vulnerable business.

Physical bullion may never be touted in the mainstream media as the next big thing. But behind AI, alternative energy, and all the other compelling high-tech storylines is the basic reality that they cannot come to fruition without metals.

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