Metals: from bellwether to bottleneck

As with any investment, your capital is at risk

Each time we ask an AI chatbot ‘just one more question’, the request travels further than we might expect. A datacentre somewhere does the real work, and that unavoidably generates heat. Keeping that heat under control takes more power again, in fans, chillers and cooling loops. Repeat this cycle billions of times and the supposed weightlessness of the digital world starts to look a lot like physical infrastructure. Is the digital economy becoming a materials‑and‑energy economy again? One that requires more electrons, more copper, more concrete.

Demand for very tangible inputs has been rising faster than supply can respond and this bottleneck is being increasingly recognised by governments who now see these materials as strategic assets. That combination of undersupply and strategic value led to a sharp rise in the price of a number of metals last year and into 2026, particularly across precious metals, copper and the platinum group.

Critical metals in demand

Metals now sit at the centre of industrial policy. What were once treated by many as a homogeneous category are increasingly discussed alongside technological leadership and national security. Governments are paying closer attention to where materials are sourced, who controls processing capacity and how resilient supply chains really are. This shift has been most visible in the US–China relationship, but it is global in nature. As a result, attention has shifted to the countries that dominate extraction, refining and processing – which is why emerging markets matter so much.

At the same time, demand is being reshaped by new industries. Electrification, power generation, grid expansion, datacentres, cooling infrastructure and AI‑related capital expenditure all require large volumes of copper, lithium and other metals. Anyone following the trends last year will be aware of the speed of change on the demand side of the equation, with industry estimates for copper suggesting significant increased demand by 2040. 

If demand can move in days, then supply moves in decades. And there’s the problem (and the opportunity). Bringing a large mine from discovery to full production typically takes about 15 years. The process involves far more than geology: years of exploration, permitting and environmental approval, securing social licence from local communities, navigating political and regulatory systems, arranging financing, and finally building complex infrastructure. Any one of these stages can cause delays or derail projects altogether. It’s no wonder that there have been multiple mine disruptions throughout 2025 alone. The result is a thin project pipeline and a market that is more vulnerable to disruption than it has been for many years.

Think about it this way, copper is no longer just a cyclical commodity – it is a strategic bottleneck. The International Energy Agency estimates that, on current trajectories, global copper supply could fall almost 40 per cent short of demand by 2040. So even if every currently planned project is delivered without disruption (highly unlikely), there would still not be enough copper to meet expected needs.

From a portfolio perspective, commodities don’t neatly fit into an oft-used definition of ‘growth’, which can assume smooth compounding. Instead, they often spend long periods testing patience before emerging as some of the strongest contributors to long‑term returns once the macro backdrop shifts. These inflection points matter – and being directionally right matters more than precise timing (we have enough self-awareness to know we can’t!). These are multi-year stories, and when the thesis plays out, the contribution to returns can be meaningful.

Where our portfolio holdings fit in

First Quantum Minerals (FQM) is a good example of this logic in practice. Our conviction has never rested on us perfectly timing the copper cycle. It rests on the quality of the asset base and the company’s ability to operate in complex environments, underpinned by a long‑term view that the world faces a meaningful shortage of copper. Despite its own challenges in Panama, which are partly reflective of the geopolitical nature of mining particularly in emerging markets, FQM has been a strong contributor to recent performance. We should also highlight the importance of copper for many Latin American economies - the strong tailwind here is relevant to a number of holdings.

Lithium illustrates a different part of the same story. Last March we wrote about how depressed the cycle had become, which seemed at odds with the rising demand outlook. EVs still set the pace of demand, but with grid-scale storage moving up the agenda quickly, lithium has gone from a single theme story to something much broader: powering transport, balancing electricity systems and supporting a more resilient grid. It does not surprise us therefore, that prices started rising late last year. Your portfolio holds SQM, a Chilean lithium miner with rights to the Salar de Atacama, one of the tier-one lithium resources globally. While we’ve trimmed the position size back after strong performance, our ongoing conviction was reinforced by our attendance at a lithium conference in Chengdu, China last quarter. 

We already consume roughly two billion tonnes of metals each year, the equivalent of constructing hundreds of Eiffel Towers every single day. Layer on the technologies driving the next phase of growth plus the strategic dimension, and the world is being forced to reassess where the real bottlenecks and sources of leverage sit. Across critical materials, energy infrastructure and the supply chains behind AI and electrification, emerging markets play an outsized and underappreciated role.

Can these metals keep running in 2026? We expect investor attention to keep shifting this way when the future of AI and electrification will be written as much in copper, lithium and concrete as it will in code. But with peer data showing the materials sector as a pronounced underweight, this isn’t widely recognised – yet.

Emerging Markets

Annual past performance to 31 December each year (%)

Annualised returns to 31 December 2025 (%)

Source: Revolution, MSCI. US dollars. Returns have been calculated by reducing the gross return by the highest annual management fee for the composite. 1 year figures are not annualised.

Past performance is not a guide to future returns.

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The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in January 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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