There's a Hot New Way to Invest in AI. Here's the Best Stock to Buy to Capitalize on It. - Yahoo Finance | Canada News Media
Connect with us

Investment

There's a Hot New Way to Invest in AI. Here's the Best Stock to Buy to Capitalize on It. – Yahoo Finance

Published

 on


Growth in artificial intelligence (AI) applications means more demand for data center power capacity to fuel it, which means more demand for copper. That’s the latest argument from copper bulls. While it’s easy to be cynical and conclude it’s merely the newest fad latching onto the market’s love for anything AI-related, the reality is the case for copper is compelling, and it’s one that investors in Freeport-McMoRan (NYSE: FCX) believe in.

The case for copper

Copper is essential for data centers, with larger hyperscale data centers requiring even more to power the growth in AI applications. J.P. Morgan recently released a research report arguing that global data center power demand could lead to a requirement for 2.6 million tons (Mt) of new copper demand by 2030. That comes on top of its existing forecast for a supply gap of 4 Mt by 2030 on the back of burgeoning demand from clean energy-related sources and limitations on new copper supply.

While it’s easy to see the impact of AI data center demand on copper usage, the clean energy transition needs some explaining. Simply put, the transition to electric vehicles over internal combustion engines, the shift in power generation from traditional fossil fuels to renewable energy, and the transmission and distribution networks needed to support both imply a significant increase in copper demand.

For example, here are a few International Energy Agency (IEA) estimates to consider:

  • The average electric car requires 53.2 kg of copper compared to 22.3 kg for a conventional car

  • Offshore wind requires 8,000 kg of copper per megawatt, solar and onshore wind requires 2,800-2,900 per megawatt, while natural gas requires just 1,100 kg.

In fact, in its “stated policies” scenario, the IEA sees the share of copper demand for clean energy technologies rising from 24% in 2020 to 32% in 2040.

Moreover, the broader electrification-of-everything trend involves the increasing use of smart cities, smart buildings, industrial automation, and many other wireless-enabled technologies that require electrification. AI will only strengthen this trend as it increases the value of using internet-enabled technology.

Image source: Getty Images.

At the same time, increasing environmental legislation and government interference are making acquiring new copper mining permits an increasingly difficult game. Moreover, new copper mines require multiyear feasibility studies and developmental investment before they can start producing — reacting to a copper supply shortfall could take time.

Why Freeport-McMoRan is well positioned

Suppose data centers, clean energy, and the electrification-of-everything trend will drive copper prices higher over the long term. In that case, investing in a copper miner makes sense, and Freeport-McMoRan stands ideally placed.

I’ve previously discussed its sensitivity to the price of copper, and the rising price of the metal is mainly behind the 19.8% increase in the stock price this year. However, I think the move has legs, not least because the stock remains a good value based on the current price of copper.

For example, management estimates its earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2025/2026 will be $10 billion at a price of $4 per pound for copper and $14 billion at a price of $5 per pound. With the current price at $4.38 per pound, penciling in an EBITDA of $11.5 billion seems reasonable. Given that the current enterprise value (market cap plus net debt), or EV, is $76 billion, a forward EV to EBITDA multiple of 6.6 times EBITDA is attractive.

The other reason to favor buying Freeport-McMoRan is its potential to increase copper production. Management plans to expand its copper sales from 4.1 billion pounds in 2024 to 4.2 billion pounds in 2025 and 4.3 billion pounds in 2026. However, there’s upside potential to its copper production/sales coming from two sources.

The first is its leaching initiative, which management believes could produce 800 million pounds per annum over the next three to five years from a run rate of 200 million at the end of 2023.

The second reason is its capability to react to rising prices by investing in brownfield projects. For example, the company has identified projects in the Americas that could result in 1.7 billion pounds of copper in extra production, with 400 million able to be brought online within three years.

Image source: Getty Images.

The best mining stock to buy

All told, Freeport-McMoRan’s leading position in the copper market and its potential to increase production at a time when the market could be heading for a supply shortfall due to rising demand from AI, renewable energy, and electrification trends make it a great stock for copper bulls to buy.

Should you invest $1,000 in Freeport-McMoRan right now?

Before you buy stock in Freeport-McMoRan, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Freeport-McMoRan wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $466,882!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of April 15, 2024

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

There’s a Hot New Way to Invest in AI. Here’s the Best Stock to Buy to Capitalize on It. was originally published by The Motley Fool

Adblock test (Why?)



Source link

Continue Reading

Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

 on

 

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

 on

 

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

 on

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.

Continue Reading

Trending

Exit mobile version