Global mining stocks are rapidly ascending to the top of fund managers' allocation lists, driven by a surge in metal demand ignited by the artificial intelligence boom and tightening supplies of critical minerals, showing signs of entering a new "super cycle." Since the beginning of 2025, the MSCI Metals and Mining Index has surged by nearly 90%, significantly outperforming the semiconductor sector, the global banking industry, and the "Magnificent Seven" tech stocks. This upward trend shows no signs of slowing, as the booming development of robotics, electric vehicles, and AI data centers continues to push metal prices higher. Among them, copper, a key raw material for the energy transition, has skyrocketed by 50% over the same period. Beyond copper, analysts are also bullish on the prospects of a range of minerals including aluminum, silver, nickel, and platinum. Meanwhile, gold, after consecutively hitting record highs, is expected to continue benefiting from concerns over US monetary and fiscal policy as well as geopolitical risks.

This stellar performance marks a significant reversal in market sentiment. The sector was once neglected due to volatile commodity prices and concerns about slowing growth in China, the largest metals consumer. Now, with Beijing pledging to support the economy through measures like interest rate cuts, fund managers who previously flocked to technology and financial stocks are re-evaluating the value of mining stocks, viewing them as core assets in their portfolios. The shift in capital allocation aligns with a structural transformation. The investment thesis for commodities is undergoing a fundamental change. The correlation of commodities like copper and aluminum with the economic cycle is weakening, gradually evolving from historically short-cycle trades dominated by the pace of global economic growth into structural investment targets. Dilin Wu, a research strategist at Pepperstone Group Ltd., points out that mining stocks have quietly transformed from a "boring defensive sector" into a "necessary portfolio anchor," becoming one of the few sectors that can capture the dynamics of monetary policy while navigating an increasingly volatile geopolitical landscape. Furthermore, investors are buying metal assets to gain exposure to the AI theme, which is also driving a trend of buying on dips. A monthly survey by Bank of America shows that European fund managers currently have a net overweight position of 26% in the sector, a four-year high, though still below the peak of 38% in 2008.

Despite the recent sharp rally, valuations in the mining sector remain low. The forward price-to-book ratio of the Stoxx 600 Basic Resources Index relative to the MSCI World benchmark is about 0.47 times. This level represents a discount of approximately 20% to the long-term average of 0.59 times and is far below the over 0.7 times seen at previous cycle peaks. A team of Morgan Stanley analysts led by Alain Gabriel believes this valuation gap persists even as the strategic importance of natural resources has significantly increased. Given the current context of supply shortages, this backdrop should support higher commodity prices and valuation multiples.

The capital-intensive nature of the industry is prompting mining companies to favor expanding capacity through mergers and acquisitions rather than new projects. Morgan Stanley notes that miners are focused on pursuing economies of scale and portfolio optimization, particularly in copper mining. Several M&A deals are currently underway, including Anglo American Plc's acquisition of Teck Resources Ltd. and a potential merger between Rio Tinto Plc and Glencore Plc. This "buy over build" trend is becoming the industry's main theme. However, top miners, including BHP Group and Rio Tinto, still rely heavily on iron ore for profits, a business segment still constrained by the aftermath of the previous China-led super cycle. This further motivates companies to pursue M&A-driven transformations into copper mining. Currently, Freeport-McMoRan Inc. and Antofagasta Plc are among the few companies offering pure-play copper exposure.

Despite the buoyant market sentiment, some institutions remain cautious. Bank of America recently downgraded the European mining sector to "underweight," citing risks of negative economic surprises. Nick Ferres, Chief Investment Officer at Vantage Point Asset Management, expressed concern about the non-linear or parabolic rise in asset prices and has reduced his gold exposure, though he would consider re-entering on price pullbacks as mining stocks remain very cheap. Regarding future price trends, Bloomberg Intelligence (BI) expects the copper supply deficit to persist this year and potentially worsen compared to 2025. For gold, BI analysts believe the price could approach $5,000 per ounce, while Goldman Sachs forecasts gold reaching $5,400 by the end of 2026, about 8% above current levels. Gerald Gan, Chief Investment Officer at Singapore's Reed Capital Partners Ltd., stated that the momentum for commodities is now stronger and more diversified, and he plans to gradually increase his portfolio exposure to mining stocks in the coming months.