Copper prices have surged to record levels, touching above $14,000 per ton on Thursday before pulling back to around $13,800 on Friday, mirroring the volatile movements seen in precious metals like gold and silver. While copper is primarily an industrial metal, it has experienced dramatic price increases over the past year, driven by a combination of factors including geopolitical tensions, US-China trade disputes, and crucially, the massive AI infrastructure buildout.
Goldman Sachs analysts have raised concerns about the sustainability of these price levels, warning that a second-quarter correction is likely on the horizon. The investment bank recently lifted its copper price target for the first half of 2026 but cautioned that a US tariff decision on refined copper could trigger a deeper market drawdown. President Trump’s July 2025 declaration of a 50% tariff on all imports of semi-finished copper products has fueled stockpiling behavior in the US market, artificially inflating demand.
A significant driver of copper’s recent rally has been its critical role in AI infrastructure development. José Torres, senior economist at Interactive Brokers, explained that “part of the enthusiasm” around copper stems from “nationalistic tailwinds, as investors in Beijing want to hold the asset that its country could use more of in the competitive AI race.” This suggests that speculation around AI’s copper requirements is driving prices as much as actual consumption.
However, multiple analysts are sounding alarm bells about the disconnect between copper prices and underlying fundamentals. Kieran Tompkins from Capital Economics noted that “the surge in copper prices has been increasingly fueled by speculation, rather than strong underlying fundamentals,” particularly in China where demand indicators suggest weakness. Goldman’s Eoin Dinsmore stated that copper has “overshot its fair fundamental level,” with current prices trading at what Torres called “nosebleed levels.”
The situation mirrors concerns about gold and silver markets, where analysts fear a FOMO-driven rally similar to meme stocks has detached prices from traditional fundamental drivers. Goldman expects an update on refined copper tariffs by mid-2026, which could “signal the end of US stockpiling and return focus to the global market surplus,” potentially triggering the anticipated correction.
Key Quotes
part of the enthusiasm around copper is due to nationalistic tailwinds, as investors in Beijing want to hold the asset that its country could use more of in the competitive AI race
José Torres, senior economist at Interactive Brokers, explained how speculation about AI infrastructure needs, particularly in China’s efforts to compete in the AI race, is driving copper prices beyond actual demand fundamentals.
It’s become quite evident that the surge in copper prices has been increasingly fueled by speculation, rather than strong underlying fundamentals
Kieran Tompkins, senior commodities economist at Capital Economics, warned that copper’s price rally is disconnected from real supply and demand dynamics, particularly noting weak demand indicators in China despite the price surge.
the price of copper has overshot its fair fundamental level
Goldman Sachs commodities analyst Eoin Dinsmore cautioned that copper prices have risen beyond what fundamentals justify, suggesting that a Trump administration tariff on refined copper could serve as a catalyst for a market correction.
is trading at nosebleed levels
Interactive Brokers’ José Torres expressed serious valuation concerns, indicating that when examining actual copper supply and demand dynamics, current prices appear unsustainably high and vulnerable to a significant pullback.
Our Take
The copper market’s volatility reveals an underappreciated aspect of the AI boom: the physical infrastructure requirements are creating commodity market distortions. While much attention focuses on semiconductor shortages and chip manufacturing, the massive electrical and cooling infrastructure needed for AI data centers requires enormous amounts of copper. What’s particularly concerning is that speculation about future AI demand appears to be driving prices more than actual consumption, creating a potential bubble. This mirrors the broader pattern we’ve seen in AI-related investments, where FOMO and hype often outpace fundamental value. The geopolitical dimension—with China stockpiling copper for its AI ambitions—adds another layer of complexity, suggesting that AI competition is reshaping global commodity strategies. Companies planning AI infrastructure buildouts should prepare for potential cost volatility and consider hedging strategies.
Why This Matters
This story highlights a critical intersection between AI development and commodity markets, demonstrating how the race for AI supremacy is creating ripple effects across global supply chains. Copper is essential for the massive data centers, power infrastructure, and computing hardware required for AI systems, making it a strategic resource in the technology competition between the US and China.
The speculative frenzy around copper reveals how AI hype is influencing investment decisions beyond traditional tech stocks, potentially creating market distortions. If analysts are correct about an impending correction, companies building AI infrastructure could face cost volatility that impacts deployment timelines and profitability. The situation also underscores how geopolitical tensions and trade policies are shaping the AI landscape, with tariffs and stockpiling behavior affecting the availability and cost of critical materials. For businesses investing in AI infrastructure, understanding commodity market dynamics has become essential for strategic planning and risk management.