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Silver’s New Playbook:
AI, Defence and the Power Build-Out Shifting Demand (and Risk) Profile

BOTTOM LINE

Silver’s demand profile is shifting from a largely cyclical blend (electronics, jewellery, investment) toward multi-year, programmatic build-outs in AI-driven data centres, defence modernisation and the power infrastructure that feeds a more electricity-centred world (via grids and solar).^1,2,3 This matters for investors: if more of silver’s consumption comes from long-lead projects and sovereign-level budgets, the metal’s demand could decouple from shorter business cycles – potentially changing its risk profile to be determined by intermediate- and long-term buying.

On the supply side, incremental growth remains low while the market continues to run deficits; 2024 marked a fourth straight structural shortfall (~149 Moz), with a cumulative stock draw of ~678 Moz since 2021, as industrial demand sets another record.⁴ Miners with capital discipline, savvy M&A strategies and high quality assets could stand to gain from these structural shifts.

1) AI & Data Centres: From Code to Concrete

Why growth is “real economy” and sticky

• Electricity pull is expanding, and projected to continue:
  • The IEA estimates total data-centre electricity use could roughly double to ~945 TWh by 2030, with AI a rapidly rising share (50% of electricity demand growth).⁹ That’s grid-scale demand that persists for the life of facilities.¹⁰
• Hyperscalers are pivoting from R&D spend to physical build-out Capex:
  • Hyperscaler data-centre capex is now the growth engine, with Dell’Oro forecasting global DC capex to reach ~$1.2T by 2029 (21% CAGR) with ~50 GW additional capacity; hyperscalers drive about half of that.¹¹ Synergy counts 1,100+hyperscale sites and a pipeline adding 130–140 new sites per year—bigger buildings, denser racks.¹² (Figure 3)
• Long-dated power contracts lock in build cycles and signal commitment:
  • Microsoft’s 20-year PPA to restart Three Mile Island Unit 1(835 MW) and AWS’s 1,920 MW nuclear PPA with Talen run into the 2030s/2040s; these are long-term commitments that anchor multi-year equipment purchases (and silver use) for servers, power distribution and cooling systems.¹³
• Balance-of-plant bottlenecks reinforce this theme:
  • Transformer shortages and long lead times (order backlogs tripling at Hitachi Energy to about $43B in three years) show that the AI wave is stressing physical grid equipment—not just GPUs.¹⁴ That equipment is shot-through with silvered contacts and buswork.¹⁵

Persistence of Demand

AI demand is not just “IP spend”; it’s anchored in multi-year power and facility capex that have profound effects on relevant metals’ demand profiles.¹⁶ The nature of these builds is inherently less cyclical than consumer electronics refresh cycles, supporting a steadier industrial draw for silver.¹⁷

How silver is used here (at a glance):

• Solder: SAC305 (Sn-96.5/Ag-3.0/Cu-0.5) is the default lead-free solder in servers, networking, storage, and power electronics.⁴
• Power path & protection: silver-plated copper busbars, breakers, relays and high-current contacts (low contact resistance, arc resistance).⁷
• Switchgear & UPS: silver surfaces in bolted joints and contactors reduce heat losses and improve reliability.⁸

2) Defence Modernisation: From R&D to Procurement (and Production)

The spending pivot that benefits physical metals:

In the EU, procurement growth is outpacing R&D. EDA’s latest Defence Data show defence investments hit €72B in 2023 (26% of spend) and are projected >€100B in 2024. >80% of those investments went to equipment procurement (~€61B); R&D was ~€11B and R&T ~€4B.²⁴ That is a tangible pivot from “ideas” to “hardware”, which should constitute a tailwind for relevant metals’ demand. (Figure 6)

The breadth of spend is increasing, rather than just the U.S. NATO says all Allies are expected to meet or exceed 2% of GDP in 2025, while SIPRI records $2.718T in 2024 global military expenditure—the fastest y/y rise since at least 1988—with Europe and the Middle East leading the surge.²⁵

“ReArm Europe / Readiness 2030” lays out build-outs by category. The Commission’s plan prioritises air & missile defence, artillery systems, ammunition & missiles, drones/counterUAS, military mobility, and AI/Quantum/Cyber/EW, all of which may translate into electronics, power conditioning and high-reliability interconnects (i.e., more silver).²⁶ Financing tools (SAFE) and coordinated procurement targets are meant to accelerate production capacity, not just research.²⁷

Persistence of Demand
Defence procurement and readiness programs run on multi-year build-outs and alliance pledges; once in motion, they tend to persist across political cycles—another reason silver’s demand mix is becoming stickier and less GDP-sensitive.²⁸

How silver is used here (at a glance):

• Connectors & contacts: MIL-spec circular connectors (e.g., MIL-DTL-5015/38999) commonly use silver-plated high-current contacts for low resistance and thermal stability.²¹
• Power electronics & sensors: silvered relay/contact materials (AgNi, AgSnO₂) in avionics, radar, EW and missile systems; solder in boards/assemblies across platforms.²²
• Ground systems: silver-plated busbars and switchgear in command/control, radar stations, hardened data facilities.²³

3) Secondary Effects: Power Grids & Solar

Why growth could be durable

Global electricity demand is now re-accelerating, driven not only by AI/data-centre load but also by wider electrification in transport, buildings (heat pumps) and industry, which may push demand growth close to 4% annually through 2027.³¹ To keep pace, grids must scale dramatically: the IEA warns annual grid investment needs to nearly double to >USD 600bn by 2030.³² Complementing this, BloombergNEF’s Net Zero Scenario pegs required grid spending at roughly USD 811bn per year by 2030, underscoring that networks – and the generation to feed them – will have to expand rapidly.³³ (Figure 7)

Solar keeps compounding, which benefits silver

Wind and solar PV are expected to cover over 90% of the increase in global electricity demand in 2025.³⁴ A record 597 GW of solar power capacity was added in 2024.³⁵ Silver in PV hit ~197.6 Moz in 2024 despite thrifting— because module volumes exploded.³⁶

Grid upgrades are essential and constrained

AI/data-centre surges amplify the need for new transformers, lines and substations; backlogs have doubled/tripled since 2019, extending lead times and prices.³⁷ These systems use silvered contacts and busbars throughout.³⁸

How silver is used here (at a glance):

• Grid gear: silver-plated copper busbars, breakers and contact sets in substations/switchgear; relay contacts in protection systems.⁷
• PV cells (solar): silver is the critical front-and back-contact metallisation paste in mainstream cell architectures (PERC/TOPCon/HJT), even as loadings are thrifted.¹⁹

4) Adjacent structural drivers: Healthcare, 5G & Quantum

Beyond the core pillars, three smaller but sticky niches round out the industrial picture

• 5G/6G & RF
  • More gear = more silver. Rolling out faster networks likely means more radios and backhaul equipment; many of these parts rely on silver finishes/contacts for performance, so densification appears to directly lift silver use and replacement demand over time.⁴¹
• QUANTUM COMPUTING
  • Small but growing niche. Rising public funding and new labs likely mean more quantum systems, each needing specialised cryogenic and RF hardware that uses silver components—building a sticky, high-spec demand pocket even at modest volumes.^42,43
• HEALTHCARE
  • Steady, regulation-backed pull. Hospitals and device makers use silver-based antimicrobials in dressings and coatings; as infection-control standards spread, this may create a recurring, baseline draw for silver in medical products.⁴⁴

Why it matters

These markets are smaller than solar or the grid, but they’re driven by multi-year programs, likely rendering their silver demand comparatively durable through cycles.

5) What this means for miners

• Pricing leverage if deficits persist
  • A demand mix increasingly anchored in AI power-hungry infrastructure, defence procurement, and solar set against constrained primary supply supports a constructive multiyear setup for well-run, disciplined producers.⁴⁵
• Discipline over dilation
  • After prior boom-bust scars, management teams are prioritising returns on capital and brownfield/bolt-on expansions instead of aggressive greenfield capacity – rational given by-product dependence and permitting drag.⁴⁶ Streaming has crept higher while producer hedging sits near multi-decade lows, consistent with a measured stance.⁴⁷
• M&A revival to solve grade and scale
  • With high-grade discoveries scarce and timelines long, miners are buying ounces and optionality (projects and near-term restarts) rather than over-building.⁴⁸ 2024’s ~$3B in silver-sector deals appear to reflect that pivot and represents a win-win for investors (through premiums paid for acquisitions) and miners themselves (through lower risk supply), if the trend persists.⁴⁹