Last week was described as America’s ‘Sputnik moment’.
That’s because US tech giants were caught with their pants down…suddenly exposed by China’s potentially superior AI capability.
It’s not a bad analogy, really…Sputnik was a moment in history when Russia stunned America’s ego by putting the first satellite in space.
But win or lose, America has shown that it won’t go down without a fight. Back then, it sparked a period of massive investment into US Space development.
But who really won the Cold War ‘Space Race?’
Arguably, it wasn’t Russia or the US.
It was stocks like Boeing, General Dynamics, or Lockheed Martin.
Companies that benefitted from massive US government investment.
These contractors supplied NASA with rockets, satellites and propulsion systems, reaping a fortune from the US government’s attempt to prove its ideological dominance over Russia.
So, how does that lead us toward the potential opportunities in this coming China versus US ‘AI-Race?’
You probably know about the Mag-7 tech stocks.
So far, these companies have benefitted from the push for AI dominance.
They’re like our Boeing or Lockheed examples from the ’60s and ’70s space era.
But there could be another way to play this trend…
The Commodity Angle
The challenge for the tech sector is to optimise the 118 elements found on Earth.
And turn these into innovative creations that better humanity.
But among all those elements, silver holds the most important physical characteristic in the modern age…
It’s the world’s most conductive material.
That makes it a key ingredient in high-end AI chips.
However, large-scale data centres also require silver for electrical components and cooling systems.
Given its supreme physical characteristics, the application for silver across the AI landscape could be limitless.
However, another commodity worth considering is high-purity alumina (HPA).
Simply put, this is a highly refined bauxite ore that removes purities, giving it unique physical characteristics.
Unlike silver, HPA is not used directly in AI chips, but it does play a critical role in producing semiconductors, sapphire substrates, and chip fabrication equipment.
These are sectors that link with the broader ‘AI architecture’.
There are a few ASX resource plays producing HPA…
Altech Batteries [ASX:ATC] – Focused on HPA for batteries and semiconductors
FYI Resources [ASX:FYI] – Developing high-purity alumina projects
Alpha HPA [ASX:A4N] – Targeting semiconductor and LED markets
Understanding the Raw Material Advantage
There could be a benefit to owning miners supplying raw materials to tech companies rather than owning tech stocks directly…
Last week’s dramatic market action showed that the AI race will be a high-stakes game for tech giants.
Where today’s leaders could rapidly become tomorrow’s laggards.
Innovation is taking place rapidly, which throws up a lot of uncertainty for investors.
Now compare that to the raw materials used to supply this sector…
Miners will extract and process ore, as they’ve always done. Supplying an industry that must then compete for the best way to utilise those materials.
While a dramatic technological shift could alter the demand for certain types of minerals, that presents less risk.
Especially for a commodity like silver…
The laws of physics dictate this metal will remain the most conductive element on Earth, regardless of how much innovation takes place!
Regards,
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James Cooper,
Editor, Mining: Phase One and Diggers and Drillers
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