Al Root

In the data factories of the future, vertical integration looks like a must.

Thursday, The Wall Street Journal reported that Amazon Web Services signed a two-year agreement with Rio Tinto's Nuton copper mining venture in Arizona. That is telling.

For starters, Amazon.com, which is spending tens of billions a year on data centers, clearly feels a need to vertically integrate to keep expanding its cloud services and AI data businesses. In 2024, Amazon partnered with Talen Energy to ensure its data centers had enough electricity. Now, it is working to ensure there is enough copper to conduct the needed electricity.

AI is a relatively new industry, and new industries can pressure existing supply chains. Take Ford Motor. Henry Ford pioneered the assembly line, using it to mass-produce affordable vehicles that reshaped the American economy. He wanted to make cars, but along the way, he invested in iron and steel, rubber, and timber to ensure the company could meet demand.

To be sure, things are a little different this time. Amazon isn't going into copper mining, leaving that to the experts at Rio Tinto. Still, it's going as far up the supply chain as the raw materials to make sure that its AI "factories" can keep functioning.

As for copper, growth in demand from power-hungry AI data centers is putting pressure on the industry. Benchmark prices have surged more than 25% over the past three months, topping $13,300 per metric ton, or about $6 per pound, earlier this week.

S&P Global estimates that demand for copper will rise from about 28 million metric tons per year in 2025 to 42 million by 2040. That is a 50% increase over 15 years, which works out to about 3% a year on average.

That rate of increase looks manageable, but digging up metals means mines are depleted, requiring companies to explore for more. Rio's Nuton project uses bacteria and lower-grade ores to produce copper, rather than a traditional smelter that uses large furnaces and a lot of electricity.

S&P Global projects copper demand will outstrip output by 10 million tons a year by 2050, if production capacity isn't significantly increased. That isn't likely to happen because rising prices give miners an incentive to develop new deposits.

Demand growth raising concerns over shortages is nothing new. "Within the next three years, consumption should easily overtake production," wrote The Wall Street Journal. That was 1909, when growing demand from the electricity and automobile industries had investors worried.

That doesn't mean the supply and demand balance should be ignored. When people writing about the industry identify potential shortfalls, it is a sign that prices need to rise to unlock new sources of supply. Using bacteria to eat copper ore is one example.

Copper at $6 per pound makes many mines and ores economically viable. Mining companies don't always respond to short-term price spikes because demand can easily fade, which is why deals like Amazon's, offering a guaranteed buyer for years, can be so important.

Rio Tinto stock was up 0.5% in overseas trading on Thursday. Amazon shares rose 0.3%, while the S&P 500 and Dow Jones Industrial Average futures were both up 0.6%.

The miner's stock is up 24% over the past three months. Shares have been rallying along with copper prices.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 15, 2026 11:05 ET (16:05 GMT)

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