Speculators: A Copper Penny Stock
A couple of weeks ago, Nvidia held its annual GTC developers conference. Developer conferences are where tech companies tease their upcoming products to get developers fired up about what new capabilities they will have to work with.
Developers are key to a tech product’s success – if they don’t make cool apps and software for a device, consumers won’t find the device useful and won’t buy/use it. The kind of video games you play on your iPhone are a prime example of how developers and Apple have worked together to build a powerful “ecosystem” for the iPhone.
Probably the best example of just how important developers are to a tech company comes from former Microsoft CEO Steve Ballmer in 2000. If you’ve never seen this video it’s worth a look:
You just don’t see multi-billionaires sweating and jumping around like that. At one point, I swear it sounds like he’s gonna start crying…
Investors often expect these developer’s conferences to be catalysts for the host’s stock price. That was certainly the case for Nvidia’s GTC conference. Even though Nvidia announced its newest GPU, the $30,000 Blackwell, the conference proved to be another “buy the rumor, sell the news” event…
Nvidia shares spiked up to $974 on the first day of the GTC conference and immediately reversed. The stock currently trades around $875. The stock sell-off isn’t an indictment of the Nvidia’s new chip. It’s not a sign of disappointment. It’s just how expectations tend to play out in the stock market.
Still, the GTC conference did reveal something no one expected. The data center servers that Nvidia showed that use the new GPU systems are replacing fiber optics with copper. Turns out, copper is much more energy efficient than fiber optics.
Nvidia’s switch to copper is just one more bullish storyline for the metal…
Demand for Dr. Copper
People used to call copper “Dr. Copper” because it was the only metal with a PhD in economics. Copper is the third most-used metal and is a critical material for homebuilding, technology, manufacturing, electricity generation, and more recently EVs and data centers – it can serve as a proxy for economic growth.
The International Energy Agency (IEA) says data center energy demands will post compound annual growth (CAGR) of 15% over the next 3 years. Or, data centers use as much energy as Brazil today, and in a few years, they will require as much as Japan.
Amazon alone says it will spend $150 billion to expand its data centers over the next decade.
The 5-year price per pound chart for copper is compelling:
Copper prices surged during the pandemic bull market as EV sales took off. Rising rates and a cool-off in the EV market knocked prices down to the $3 to $4 a pound range. Copper prices are just now breaking back over $4.
Copper stocks like Southern Copper (NASDAQ: SCCO), Freeport-McMoRan (NYSE: FCX), Teck Resources (NASDAQ: TECK), and Australia’s Anglo American (NGLOY) are all trading at 52-week highs because copper supply and demand is expected to fall into deficit as soon as 2025.
For a more speculative play, check out McEwen Mining (NYSE: MUX). Its subsidiary, McEwen Copper owns the 8th biggest undeveloped copper mine in the world, Los Azules in Argentina. There won’t be any significant production until 2025 at best, but that didn’t stop Stellantis from buying 19% of McEwan Copper to secure a supply.
If you really want to get speculative, the biggest undeveloped copper mine in the world is the Pebble Project in Alaska. It’s owned by Northern Dynasty Minerals (NYSE: NAK). Northern Dynasty estimates the Pebble Project has 6.5 billion tonnes of copper. The stock trades for $0.32 a share.
Please note: Northern Dynasty only has $1.3 million in actual cash. Its $173 million market cap is based totally on potential. Geopolitical risk in Alaska would be nil, which may be attractive to the partner that Northern Dynasty will definitely need.
Briton Ryle
Chief Investment Strategist
Pro Trader Today
brit.ryle@protradertoday.com
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