Implications for equity markets of rising demand for critical minerals
By:
Sandrine Soubeyran, Director, Global Investment Research
Alex Nae, Msc., Quantitative Research Analyst, Global Investment Research
Key takeaways:
- Demand for critical minerals is set to accelerate, driven by the rapid adoption of artificial intelligence in clean energy technologies, next-generation semiconductors and advanced digital infrastructure.
- Critical mineral strategies are likely to lead to further investment in exploration, refining and processing, thus reshaping supply chains and market dynamics.
- Given the current supply concentration of critical minerals, international collaboration is expected to intensify to mitigate supply chain risks.
- Analysis of equity markets in Australia, Brazil, China and India reveals contrasting trends; Basic materials sectors in Australia, Brazil and India have generally underperformed their broader markets over 10 years, compared to an outperformance in the last twelve months. In contrast, China’s basic materials sector has strongly outperformed over the last 10 years but lagged in the last twelve months, reflecting shifting investor sentiment and supply chain adjustments.
- Valuation metrics remain compelling in equity markets like Australia, Brazil and India, whose economies are well positioned to capitalize on the convergence of digital growth and their wealth in natural resources.
- Investors will need to assess geopolitical risks, supply chain vulnerabilities and the potential for technological advancements to redefine their demand projections.
Points of differentiation:
- This paper deepens the understanding of critical minerals and their use in the modern global economy
- It explains the shifts in global chain dynamics and the opportunities that they will create for new entrants
- It has clear relevance to portfolios as it highlights the compelling equity market valuation of economies that can capitalise on the convergence of the digital growth and their wealth in natural resource
What does our research mean for investors?
- Rising demand for critical minerals is creating compelling opportunities for investors: This trend is driven by the rapid adoption of artificial intelligence, the expansion of data centres and graphic processing units, the rollout of next-generation semiconductors, 5G networks, and advanced digital infrastructure. Clean energy technologies, electric vehicles, and the broader economy’s shift toward digitisation and automation further increase this need, embedding these minerals at the core of the modern global economy.
- To mitigate significant geographic concentration in mining and production of critical minerals today, a new wave of cross-border partnerships is reshaping the supply chain dynamics, as countries and companies seek to diversify sources of critical minerals. This trend is prompting shifts in trade policies and new exploration initiatives.
- Equity performance is starting to reflect this evolving landscape. Established producers, like China, may see renewed investment as their reserves grow in strategic importance, while emerging players could introduce new competitive dynamics.
- Valuation metrics across Australia, Brazil and India remain compelling, suggesting that these economies are well positioned to capitalize on the convergence of digital growth and their wealth in natural resources.
- Investors will need to assess geopolitical risks, supply chain vulnerabilities, the environmental impact and the potential for technological advancements to redefine their demand projections.
Originally posted on July 1, 2025 on LSEG blog
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