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Here’s Why The Booming AI Revolution Makes This Commodity A Compelling Buy

By:
Phil Carr
Published: May 17, 2024, 20:25 GMT+00:00

It's a fact, electricity demand is experiencing three times faster growth in 2024 than what we have seen in a decade. This ultimately means one thing – the world needs more electricity and fast!

In this article:

The Hidden Fuel of AI: Natural Gas and the Global Data Center Expansion

According to GSC Commodity Intelligence – a major factor behind skyrocketing demand is rapid innovation in artificial intelligence, which is driving the construction of large data centers to handle and process the vast amount of generated data.

AI is also part of a huge scale-up of cloud computing. Tech firms like Amazon, Apple, Google, Meta and Microsoft are scouring the world for sites to build new data centres. In fact, Microsoft alone is opening a new data centre globally every three days.

There is no denying that data centers are energy-hungry, and their power needs are soaring at an unprecedented pace. This trend is here to stay and shows no sign of slowing down anytime soon.

Data centers need reliable, uninterruptible power to function 24/7. Renewables energy such as solar and wind, even when backed-up by batteries, cannot provide that on their own. While this remains a major challenge for the sector – there is only one alternative fuel offering reliable, steady, power at scale, with almost 50% less emissions than coal.

And that’s Natural Gas.

Surging Demand, Shrinking Supply: The Natural Gas Market Set for New Highs in 2024

In a recent research report, analysts at GSC Commodity Intelligence forecasted that a spike in power demand from artificial intelligence data centres is estimated to double in the next two years. The report went onto say that after globally consuming an estimated 460 TWh in 2023, data centres’ total electricity consumption could reach more than 1000 TWh in 2025.

Put another way, 1000 TWh is equivalent to the United Kingdom, France and Germany’s annual electricity consumption combined.

Over the past month, U.S Natural Gas prices have surged over 40% to hit a four-month-high of $2.60 per million British thermal units.

And this could just the beginning!

As demand surges and the world needs more Natural Gas and lots of it fast – there’s one big problem.

Global supply is shrinking due to a sharp cutback in drilling and capital investment across the industry causing a severe shortage in worldwide output.

All of this means one thing – the Natural Gas market is only going to get tighter and that will inevitability push prices a lot higher from current levels.

Whichever way you look at it, one thing is clear. The macroeconomic backdrop for Commodities in 2024 is looking more bullish than ever before – and it certainly won’t take much for prices to breach new highs in the coming weeks and months ahead.

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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