Investing in S&P/ASX 200 Index (ASX: XJO) mining stocks to capitalise on the AI revolution?
Surely that should be tech stocks, right?
Well, yes.
And no.
Indeed, ASX 200 tech stock NextDc Ltd (ASX: NXT) is well-placed to make hay from the rapid rollout of AI.
The data centre operator and services provider is experiencing booming demand, helping drive the NextDC share price up by 26% over the past six months.
In fact, demand is so strong that the tech company launched a $1.32 billion capital raising last week. The funds will be used to expand its operations in Sydney and Melbourne.
Which brings us back to ASX 200 mining stocks.
Copper, uranium and AI, oh my!
You see, even yesterday's data centres (meaning most current ones) use a lot of power. And to channel that power they use a lot of copper.
According to NextDC CEO Craig Scroggie, the next generation of data centres the company is developing will draw 10 times as much power as current facilities.
And numerous analysts are already sounding the alarm that the AI revolution will result in a shortfall of electricity supplies.
Meaning if we don't want to choose between keeping the lights on and consulting with our AI co-pilots, we'll need to think outside the box.
Enter the two ASX 200 mining stocks in question.
ASX 200 mining stocks to underpin the rise of AI
The first mining stock that could benefit over the longer term from the explosive growth of AI is uranium miner Paladin Energy Ltd (ASX: PDN).
Paladin has already been benefiting from surging global uranium demand, which saw the radioactive metal trading for an all-time high of US$106 per pound in February.
That same pound is currently worth around US$90, up from an average price of US$67 per pound in 2023. That's helped the Paladin share price surge 132% over the past year. (Bear in mind the company's recent 10-1 reverse split may show the share price has fallen. It has not.)
But the ASX 200 mining stock could receive tailwinds beyond the ambitious nuclear power expansion plans pledged by 22 nations at December's COP28 climate conference.
As the globe continues to push towards emissions-free energy, NextDC's Scroggie said that nuclear should be part of the mix to ensure AI-capable data centres can run 24/7.
"We need power, we need transmission networks, we need green energy, we need more solar, we need more wind and, frankly, we need nuclear," Scroggie said.
He added:
We're going from general purpose computing to high-performance computing. That will see a generational change both in the scale and the density of computers. We have to find net zero power options that are capable of supporting energy needs when the sun is not shining and the wind is not blowing and batteries are not going to cut it.
With the global push for reliable baseload power now getting an AI-driven boost, Paladin Energy is well-placed to gain from the revolution.
Of course, all that extra energy needs a medium to travel through.
The missing element
Enter ASX 200 mining stock Sandfire Resources Ltd (ASX: SFR).
In the first half of FY 2024, copper made up 74% of Sandfire's earnings.
Atop from roofing and plumbing, copper is primarily used in electrical equipment and wiring.
Surging copper demand from the rapid growth of EVs amid limited new copper supplies has seen copper prices charge from US$8,544 on 2 January to US$9,468 today, up 11%. That's helped drive the Sandfire Resources share price up 50% in just six months.
And now we have the AI revolution to add even greater demand for the red metal over the decade ahead.
"We're adding even more sources of demand. First it was the energy transition, now also data centres and AI. That growth has suddenly exploded." Saad Rahim, chief economist at Trafigura said.
Citi global head of commodities, Max Layton added, "We think the stars are aligning for the copper bull story."
Which should come as good news for this ASX 200 mining stock.
