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| By Sean Brodrick |
Silver has been on one heck of a rollercoaster ride.
After rocketing above $100 an ounce in January — briefly reaching roughly $120 — silver suffered the kind of stomach-churning correction this metal is famous for.
But buckle up, Buttercup! The ride ain’t over yet.
While it is still more than 40% below its January high, silver is climbing again — back above $60 in August and is now around $65.
Driving it are forces I’ve talked about before — tight supply, booming investment demand, a weaker dollar and enormous industrial consumption.
But now there’s a new force on the scene.
And it rhymes with artificial intelligence. I’ll get to that. First …
The Squeeze
The basic silver story is easy to understand: According to the Silver Institute, the global silver market is forecast to run a 46.3-million-ounce deficit in 2026.
That marks the sixth consecutive year of global silver deficits.
The cumulative shortfall since 2021 amounts to hundreds of millions of ounces.
Demand has multiple tailwinds.
4 Forces Driving Silver Higher
Force #1: Gold
Silver is both an industrial metal and a precious metal, so it tends to follow gold over time.
The dollar is weakening, and metals are priced in dollars.
Silver tends to be the higher-beta version of gold. When precious metals really get moving, silver can move a LOT faster.
Force #2: Tight Supply
More than 70% of the world's silver is produced as a byproduct of mining copper, lead, zinc and gold.
So, even when silver prices rise dramatically, supply can't simply turn on the taps.
Force #3: Investor Demand
Physical silver investment demand — coins and bars — rose 14% last year.
This year, it's forecast to jump another 18% to roughly 257 million to 258 million ounces, the highest level since 2022.
U.S. physical investment demand alone is forecast to surge 57%.
That's a lot of metal disappearing into vaults, safes and sock drawers.
Force #4: Industrial Demand
This is what really separates silver from gold.
Roughly 58% of silver demand is industrial.
Silver is critical to electronics, electric vehicles, electrical grids, telecommunications equipment and a host of other applications.
Industrial silver demand is currently around 650 million ounces annually.
The Silver Institute projects that figure could climb roughly 46% over the next decade to around 950 million ounces.
And the composition of that demand is starting to change.
Solar Is Using Less Silver
For years, one of the biggest bullish stories for silver was solar power.
Photovoltaic cells use silver paste to collect and transport electricity.
As the global solar industry exploded, silver consumption exploded along with it.
Solar silver demand more than doubled from roughly 82 million ounces in 2020 to nearly 198 million ounces in 2024.
But silver got expensive.
Manufacturers responded by reducing the amount of silver required per watt.
They're also experimenting with copper substitution, although replacing silver completely remains difficult.
Solar demand for silver peaked in 2024 and is forecast to fall 19% to roughly 151 million ounces in 2026.
That sounds bearish. Except another enormous consumer of silver is arriving at exactly the right time.
AI Is Hungry for Silver
AI has an insatiable appetite for electricity.
Silver has the highest electrical conductivity of any metal — roughly 7% better than copper.
It also has exceptional thermal conductivity and performs well under the extreme heat and power loads that are increasingly common in AI data centers.
That matters because AI servers are power hogs.
Traditional server racks might draw 10 to 15 kilowatts. Modern AI accelerator racks can require 60 to 120 kilowatts or more.
That enormous jump in power density requires better electrical infrastructure.
Silver is used in circuit boards, semiconductor packaging, switches and thermal-management materials inside servers.
It's also used in the high-voltage power infrastructure surrounding those servers.
The numbers are already getting interesting.
Estimated silver consumption from data centers and AI infrastructure has risen from approximately 8.5 million ounces in 2022 to 31 million ounces last year.
This year, it's forecast to reach roughly 41.5 million ounces.
That's nearly a fivefold increase in just four years.
At the same time, global data-center IT power capacity has climbed from roughly 28 gigawatts in 2022 to a forecast 62 gigawatts this year.
And we're still in the early innings of the AI infrastructure buildout.
More AI accelerators require more servers.
More servers require more electrical distribution equipment.
More data centers require new substations, transformers, transmission lines and grid infrastructure.
Silver gets pulled through that entire chain.
A Great Way to Play It
You can buy physical silver, or a silver ETF.
But I like the leverage offered by miners because they are leveraged to the underlying metal.
So, consider the Global X Silver Miners ETF (SIL).
This basket of miners holds major silver producers, including:
- Wheaton Precious Metals (WPM)
- Pan American Silver (PAAS)
- Coeur Mining (CDE)
- First Majestic Silver (AG)
- Hecla Mining (HL)
- Fresnillo (FNLPF)
It charges a 0.65% expense ratio.
The SIL rallied hard last year with silver.
It pulled back, squeezed out the weak hands and this rollercoaster looks ready to head to new heights.
The bull case for silver is simple: Six consecutive years of supply deficits. Tight mine supply. Rising investment demand. Strong industrial demand.
And now we can add AI’s thirst for electricity.
Last year, silver showed us what it can do when supply gets tight and investors rush through the door at the same time.
The next leg higher could come sooner than many on Wall Street think possible.
All the best,
Sean Brodrick
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