AI Data Center Power Requirements Increasing Demand For Critical Materials Like Copper And Uranium

Artificial intelligence (AI) has proliferated rapidly, and this has had consequences for energy consumption. Some technology firms are securing their own clean energy sources to power their data centers–especially to identify new, sustainable and long-term ones.

The Energy Consumption Of AI And Data Centers

As AI adoption and advancement continue to accelerate, the demand for electrical power to sustain data centers, which support cloud computing, big data processing and AI algorithms, is also on the rise. As reported by S&P Global Commodity Insight, in 2022, global power consumption from data centers was approximately 460 Terawatt hour (TWh). That could double by 2026 to more than 1,000 TWh, roughly equal to Japan’s total electricity use.  

With the creation and usage of generative AI tools across many industries, hyperscale data centers – a specialized category of data center designed to power immense amounts of digital information and computational tasks – have become a central focus. In the U.S., research conducted by Boston Consulting Group states that growth in demand for data center services, particularly for generative AI, is driving up power usage and density. 

Data center electricity consumption was 2.5% of the U.S. total (~130 TWh) in 2022 and is expected to triple to 7.5% (~390 TWh) by 2030. Given the significant amount of energy required to power generative AI models, many companies are pivoting toward, if not building, data centers that run on sustainable energy sources. 

Using Current And New Sustainable Energy Sources

Recognizing the high energy requirements for data centers, big tech firms such as Amazon.com Inc AMZN, Alphabet Inc. GOOG, and Microsoft Corp MSFT are among the first to explore using sustainable energy sources, including wind and solar, to power their business operations, such as data centers. For example, Amazon has committed to matching all the electricity used to power its operations with 100% renewable energy and is on track to meet said goal by 2025. 

The firm recently entered into a power purchase agreement with Scottish Power Renewables, one of the world's largest clean energy companies. The new agreement will see the company purchase a portion of the 1.4 GW of clean electricity generated by East Anglia THREE, Scottish Power Renewables' biggest ever offshore wind farm and the second largest in the world when it comes into operation in 2026.

While using sustainable energy will alleviate existing demands on the electricity grid, the intermittent nature of solar and wind energy is a challenge. As such, firms are now exploring nuclear energy as a viable power source. Microsoft, OpenAI's partner and largest investor, believes nuclear power can help fulfill its massive electricity needs as it ventures further into artificial intelligence and supercomputing. 

Recently, the firm hired Erin Henderson, PhD, MBA, PMP, as the director of nuclear development acceleration, to devise a global strategy for small modular reactors and microreactors to power Microsoft’s data centers. Small modular reactors (SMRs) are advanced nuclear reactors with a power capacity of up to 300 Megawatts electric (MW(e)) per unit, about one-third of the generation capacity of traditional nuclear power reactors. SMRs can produce a large amount of low-carbon electricity.

Gaining Exposure To The Energy Transition Resources

As big tech firms find different avenues to power their data centers, there will be increased demand for the critical minerals needed to generate, transmit and store cleaner energy. For investors, this presents an opportunity, as having material exposure to these essential resources allows them to benefit from the gradual price appreciation that will likely occur.

Sprott Copper Miners ETF

Copper's exceptional electrical conductivity and contribution to energy efficiency make it a critical element in energy transmission. It's broad market demand and versatility in use across many industries have historically positioned its price as a gauge of the global economy. As the global economy moves toward decarbonization and electrification, emerging clean-energy technologies require significantly more copper than traditional systems. 

For investors looking to gain exposure to copper, the Sprott Copper Miners ETF COPP provides pure-play exposure to large-, mid- and small-cap copper mining companies that are providing a critical mineral necessary for the clean energy transition. Copper's exceptional electrical conductivity and contribution to energy efficiency make it essential to energy transmission. 

Copper is indispensable across a wide spectrum of applications, from powering energy grids and essential components of clean energy technologies to being a fundamental element in virtually every electronic device. The ETF tracks the Nasdaq Sprott Copper Miners™ Index, which reflects a broad universe of global securities in the copper industry, including copper producers, developers and explorers.

Sprott Uranium Miners ETF

The growing demand for energy globally and the need to move away from fossil fuels is setting the stage for nuclear power. For a national, state or local utility, the appeal of nuclear power starts with its reliability, as the sometimes intermittent nature of solar and wind energy can affect its dependability in long-term power generation. 

Regarding safety, nuclear power plants have advanced in recent decades and the technology has evolved so that plants operate and maintain reactors more efficiently. This translates to fewer, shorter disruptions in the reactors' consistent electrical power production. Finally, nuclear power is clean, as it generates the lowest greenhouse gasses of any power source.

Essential to nuclear energy is uranium, a very heavy metal that can be used as an abundant source of concentrated energy for nuclear reactors. The Sprott Uranium Miners ETF URNM provides investors with exposure to companies that devote at least 50% of their assets to the uranium mining industry, which may include mining, exploration, development, and production of uranium, or holding physical uranium, owning uranium royalties, or engaging in other, non-mining activities that support the uranium mining industry, by tracking the North Shore Global Uranium Mining Index. 

A Timely Opportunity

As technology increases power demand and we also move toward decarbonization, the value of the critical materials required for energy production and transmission may grow over time. For investors, gaining exposure to companies well-positioned to benefit from the increased investment in the critical minerals needed for clean energy is a timely opportunity that can reap benefits for the future. 

Featured photo by Anthony Indraus on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.