VanEck Flags Commodity Valuation Gap Against US Equities
VanEck states commodity prices are at their lowest relative to US stocks since the 1990s.
VanEck reports that commodity valuations are at their lowest relative to US equities since the 1990s technology boom. The firm manages US$240 billion in assets. It argues that investors remain significantly underexposed to the sector.
Arian Neiron, CEO of VanEck Asia Pacific, identifies shifting supply chain dynamics as the primary driver. He notes that supply chains are shrinking while global demand rises. Supply constraints persist despite rising global credit levels.
Electricity demand drives resource needs
Global energy use has tripled since 1960. The International Energy Agency projects electricity consumption to reach 33,600 terawatt hours by 2030. This represents an increase of 1,100 terawatt hours per year.
Data centers will consume roughly 1,200 terawatt hours by 2035. This growth requires substantial input of copper, lithium, steel, and concrete. Electric vehicles also contribute to this rising load.
Capital flows favor bond funds
Trillions of US dollars have flowed into bond funds since 1997. Flows into global commodity funds have remained barely positive. This imbalance creates potential for a market reversal.
Previous commodity underperformance was driven by oil production booms and low interest rates. US businesses shifted toward service sectors with lower resource intensity. The rise in artificial intelligence is reversing this trend.
AI spending reshapes industrial demand
Artificial intelligence drives significant capital spending on computing power. This demand translates directly into higher energy consumption. The sector shift favors natural resources as an asset class.
Source GN markets/commodities (en-US) reports that investors seek exposure to rising demand. They also look for protection from inflationary effects. Higher resource prices are expected to persist.
