NVIDIA’s Shakeup Clouds Copper’s AI Boom

The recent turmoil at NVIDIA Corporation, spearheaded by the resignation of CEO Jensen Huang, has cast a shadow over the copper market's anticipated AI boom. The company's stock price dropped to $148.80 per share, a decline of over 38% from its peak, a figure that is particularly jarring considering NVIDIA's status as a global giant.

This volatility has been exacerbated by concerns over key person risk, with experts pointing to NVIDIA's reliance on Huang as a significant factor. Furthermore, the company is under investigation for possible foreign intelligence targeting Huang, and Washington is expected to scrutinize his stance on China's chip industry. While the reduction in chip orders may not directly impact copper demand, the shift in investment patterns in response to data center investments could have broader implications.

For instance, the International Energy Agency has warned that data center investments are too large to be funded by company balance sheets alone. Hence, when substations, cooling systems, or nuclear restarts are delayed, there is a tendency for copper and aluminum purchases to be delayed rather than cancelled. One example of this is the Constellation Energy Corporation's Crane plant restart, scheduled for 2027.

Despite NVIDIA's efforts to reduce its reliance on copper, the company has invested heavily in optic leaders such as Corning Inc. (NYSE:GLW), Coherent Corp. (NYSE:COHR), and Lumentum Holdings Inc. (NASDAQ:LITE). While copper remains essential for racks and grids, the uncertainty surrounding Huang's departure and the potential shifts in data center investments due to optic substitution and political gridlock could dampen the expected AI metals boom.