With gains far exceeding those of semiconductor stocks and Mag 7, global mining stocks have become the top allocation target for fund managers.
Global mining stocks are becoming a new favorite for fund managers, driven by the AI boom and tightening supply of critical minerals, propelling the industry into a new ‘super cycle.’ Metal and mining indices have significantly outperformed tech giants. As investment logic shifts from cyclical drivers to structural demand, valuations of mining stocks have risen substantially but remain at historically low levels. The sector is witnessing active mergers and acquisitions, with institutions divided on price outlooks but predominantly optimistic in the long term.
Global mining stocks are rapidly rising to the top of fund managers’ allocation lists, driven by a surge in metal demand fueled by the artificial intelligence boom and tightening supplies of critical minerals, signaling the onset of a new ‘super cycle’ for the industry.
Since early 2025, the MSCI Metals and Mining Index has surged nearly 90%, significantly outperforming the semiconductor sector, global banking, and the ‘Magnificent Seven’ tech stocks. This rally shows no signs of slowing as the booming growth of robotics, electric vehicles, and AI data centers continues to drive up metal prices.
Copper, a key raw material for energy transition, has soared 50% during the same period. Beyond copper, analysts remain bullish on the prospects of a range of minerals including aluminum, silver, nickel, and platinum. Meanwhile, gold, which has repeatedly hit record highs, is expected to continue benefiting from concerns over U.S. monetary and fiscal policies as well as geopolitical risks.
This outstanding performance marks a significant reversal in market sentiment. Previously shunned due to volatility in commodity prices and concerns over slowing growth in China, the largest consumer of metals, the sector is now being reevaluated by fund managers who had previously flocked to technology and financial stocks, positioning mining stocks as core assets in their portfolios following Beijing’s commitment to supporting the economy through measures such as interest rate cuts.
Shift in Capital Allocation and Structural Changes
The investment logic for commodities is undergoing a fundamental shift. Commodities like copper and aluminum are becoming less correlated with economic cycles, transitioning from historically short-cycle trades driven by global economic growth rates to structural investment targets. Dilin Wu, research strategist at Pepperstone Group Ltd., noted that mining stocks have quietly transformed from ‘boring defensive sectors’ into ‘essential portfolio anchors,’ becoming one of the few sectors capable of capturing dynamic changes in monetary policy while addressing an increasingly volatile geopolitical landscape.
Furthermore, investors are driving a trend of buying on dips by purchasing metal assets to gain exposure to the artificial intelligence theme. Bank of America’s monthly survey revealed that European fund managers currently hold a net overweight position of 26% in the sector, the highest in four years, though still below the peak of 38% in 2008.
Valuation Discounts Provide a Margin of Safety
Despite the recent sharp rise, valuations in the mining sector remain low. The Stoxx 600 Basic Resources Index trades at a forward price-to-book ratio of approximately 0.47 times relative to the MSCI Global Benchmark Index. This level represents a discount of about 20% compared to the long-term average of 0.59 times and is significantly lower than the peaks above 0.7 times seen in previous cycles.
A team of Morgan Stanley analysts led by Alain Gabriel believes that this valuation gap persists despite the significant increase in the strategic importance of natural resources. Given the current backdrop of supply shortages, this environment should support higher commodity prices and valuation multiples.
M&A Wave and ‘Buy Over Build’
The capital-intensive nature of the industry is driving mining companies to expand capacity through mergers and acquisitions rather than new projects. Morgan Stanley pointed out that miners are focusing on achieving economies of scale and optimizing their portfolios, particularly in the copper sector. Several M&A deals are currently underway, including Anglo American Plc’s acquisition of Teck Resources Ltd., and the potential merger between Rio Tinto Plc and Glencore Plc. This ‘buy over build’ trend is becoming the main theme in the industry.
However, top miners such as BHP Group and Rio Tinto still primarily rely on iron ore for profits, a segment that remains affected by the aftermath of the previous supercycle driven by China. This has further spurred companies to pursue M&A-driven transitions toward copper mining. Currently, Freeport-McMoRan Inc. and Antofagasta Plc are among the few companies offering pure copper exposure.
Divergence in Institutional Views and Price Outlook
Despite strong market sentiment, some institutions remain cautious. Bank of America recently downgraded the European mining sector to ‘underweight’, citing the risk of negative economic surprises. Nick Ferres, Chief Investment Officer at Vantage Point Asset Management, expressed concerns about non-linear or parabolic increases in asset prices. He has reduced his gold exposure but plans to re-enter if prices retreat, as mining stocks remain significantly undervalued.
Regarding future price movements, Bloomberg Intelligence (BI) forecasts that copper supply shortages will persist this year and may worsen compared to 2025. For gold, BI analysts predict prices could approach $5,000 per ounce, while Goldman Sachs expects gold to reach $5,400 by the end of 2026, approximately 8% higher than current levels. Gerald Gan, Chief Investment Officer at Reed Capital Partners Ltd. in Singapore, noted that the momentum behind commodity price increases has become stronger and more diversified. He plans to gradually increase portfolio exposure to mining stocks in the coming months.
