The incredible pace of AI development relies not just on smarter algorithms but also on the rare earth metals that power the hardware. As AI tech expands, these metals—vital for semiconductors and data centres—are fast becoming a linchpin in the race for innovation. Barclays warns that the market’s concentrated nature could soon push prices higher, making every ounce of these elements more precious.
Barclays analysts point out that the unique magnetic properties of rare earth metals make them indispensable for cutting-edge computing. Despite their clear advantages, the supply chain is far from even, with a handful of key players dominating the field. This uneven distribution can leave the industry vulnerable, especially when it comes to meeting the surging global demand.
China stands at the forefront of this landscape, controlling a major share of both mining and refining. In fact, China provides nearly 80% of processed cobalt, 65% of refined lithium, 44% of refined copper, and 27% of refined nickel—figures that collectively amount to almost half of the world’s refined mineral supply. While emerging players like Chile, the Democratic Republic of Congo, and Guinea are beginning to ramp up their mining efforts (Guinea, for example, has seen a twelvefold increase in aluminium exports since 2010), the fact remains that the geopolitical implications are serious. Without robust domestic capabilities, particularly in the US where heavy rare earth separation is lacking, several sectors—from chip manufacturing to defence—are taking a hit.
Even as the US looks to secure more stable supply chains—recently signing a deal with Ukraine for essential AI resources—the investment community hasn’t fully grasped the potential upside. Demand for metals such as copper, lithium, and nickel could soar by as much as 500% by 2050, potentially eclipsing traditional energy sources like oil and gas. Although recent market corrections and inventory surpluses have nudged prices down, the trend could soon reverse, making rare earth metals a hot topic for investors.
