A short item in Axios last week caught my eye. Red Metals, a copper refining startup backed by Tesla co-founder JB Straubel, is running a 42,000-square-foot plant in South Carolina and just lined up another $3.5 million in equipment financing. It is not batteries, and it is not chips. It is copper refining, an industry that has been around forever. And Straubel is not the only one betting on it. Still Bright, a New Jersey startup using an electrochemical process to reprocess copper, is backed by Breakthrough Energy Ventures and Fortescue and is lining up a $40 million Series A for next quarter. BHP’s venture arm has bet on PH7 Technologies, and Gigascale Capital has bet on Skouria.
So why copper, and why now? I think S&P Global’s January report, “Copper in the Age of AI,” called this one early. It projects that global copper demand will climb 50% by 2040, reaching 42 million tons a year, with AI, data centers, and defense alone adding about 4 million tons of that. The problem is supply. Global copper production is expected to peak at 33 million tons in 2030, then start declining, leaving a shortfall of more than 10 million tons, 25% of projected demand, by 2040.
It takes an average of 17 years to get a new mine from discovery to production. Compare that to the 3 to 5 years it takes to build a data center, and you start to see how differently this industry runs on time. AI-assisted exploration and refining could eventually shorten that mine timeline, but for now it is still a grinding, decade-plus process at best.
None of this is actually new, by the way. EVs, renewable power, grid buildout, the broader energy transition from a fossil-fuel-based system to an electrified one, have been pushing copper demand higher for more than a decade.
Even in S&P’s own report, energy transition demand (15.7 million tons) dwarfs the combined AI, data center, and defense number (4 million tons). Honestly, 15.7 million tons is hard to picture just by reading the number, so maybe just file it under “a lot more.” Still, the reason AI and data centers are getting so much attention within that smaller 4 million ton slice is that three years ago, this demand was not even in the forecasting models. S&P Global’s head of energy transition consulting put it well: three years ago, AI and data centers were not even on the radar. That alone says something about how fast this industry is having to recalculate.
Think of copper’s role in a data center as its vascular system. It is in the wiring inside server racks, the pipes in the cooling systems, the transformer windings, and the transmission infrastructure running all the way from the power plant to the campus. Last year alone, 100 new data center projects were announced globally, worth $61 billion. Every one of those comes with a massive copper bill attached.
The US actually has plenty of copper in the ground, but not enough refining capacity. The reason is simple: it does not pencil out. Refining requires enormous capital investment, and once you factor in America’s high cost of materials, labor, and everything else, the economics just do not work.
So even when raw ore does get mined, much of the work turning it into high-purity copper still gets outsourced, mostly to China. That is exactly why VCs are putting money into refining and reprocessing startups instead of mining companies. If opening a new mine takes 17 years, reprocessing copper scrap that has already been mined, faster and cleaner, domestically, gets your capital back a lot quicker. Did I mention it is expensive? These days, top-tier VCs are basically paying money to buy back that time.
To be clear, this is more of a hypothesis on my part than a confirmed trend, still an early signal at best. What I think actually matters here is not the dollar figures but how much the investment frame around AI infrastructure keeps expanding. Last year, every conversation in this industry was about securing GPUs. Then it was memory. Then it was power shortages. It is starting to feel like a show entering its next season. Now that raw material processing has made the list too, it suggests the bottleneck in data center capex is not just chips anymore, it is spreading across the whole supply chain. I could not tell you exactly where the next traffic jam will hit, but one thing seems clear: the further up the chain the bottleneck moves (chips, then power, then raw materials), the more room VCs have to get involved.
There is a real possibility that aluminum eats into some of copper’s share. It conducts less efficiently, but its weight and cost advantages already make it the choice for certain wiring segments, and that shift could accelerate if copper prices keep climbing.
And of course, there is a decent chance the headline data center numbers themselves are inflated. As Bloomberg pointed out in August, a large share of the US data center projects that have applied for power will probably never actually get built, and that phantom demand is likely baked into copper demand estimates too. So it is worth treating these copper demand projections with a healthy amount of skepticism rather than taking them at face value.
The actual scale of these refining startups, compared to established players, is still basically first-birthday-party stuff. There is a long way to go. Still Bright’s current throughput is about 2 tons a year. Against the multi-million-ton gap S&P is talking about, that is rounding-error territory.
Whether these startups actually close that gap, or end up as scale-up failure stories a few years from now, is not something I can call with confidence yet. But the fact that this much capital is already flowing into plants instead of mines is reason enough to keep watching where the next bottleneck breaks.
Sources
Substantial Shortfall in Copper Supply Widens (S&P Global press release, 2026-01-08)
AI to boost copper demand 50% by 2040 (MINING.COM, 2026-01-08)
The future depends on copper… systemic risk (Fortune, 2026-01-09)
AI’s appetite for copper poses a ‘systemic risk’ (SDxCentral)
American copper processing sees renewed startup/investor interest (Axios, 2026-08-14)
Red Metals attracts $10M investment for refinery (Recycling Today)
AI data center boom, power grids strengthen investment case for copper (Bloomberg, 2026-08-28)
Most Power Sought for US Data Centers Will Never Materialize (Bloomberg, 2026-08-12)