AI is fueling copper demand. Kevin Simpson thinks this volatile miner is worth the risk
Freeport McMoRan Inc. is one of our newest positions in our dividend income portfolio, and it’s a good example of where I’m absolutely willing to take on more risk when the potential reward makes sense. As a major copper producer, Freeport’s earnings and stock price can swing sharply with copper prices. But I believe the metal has one of the strongest long-term supply-demand stories in commodities. The Phoenix-based company is one of the world’s largest publicly traded copper producers, with mining operations across the U.S., South America and Indonesia. Key Points Copper demand is rising because of artificial intelligence, while new mines can take years to develop. Higher copper prices can have an outsized impact on Freeport’s earnings and cash flow. The stock’s valuation looks a lot cheaper when considering their potential earnings in 2027 and beyond. Copper is essential to everything from power grids and EVs to the massive data centers being built for AI. All of that requires more electricity, and more copper to generate and deliver that power. That’s what makes Freeport interesting to me. It gives me direct exposure to a commodity where demand is growing and new supply is difficult and expensive to bring online. Why I’m buying The world needs a lot more copper Copper is at the center of several major investment trends. AI and data centers require enormous amounts of power, and utilities are spending to expand and modernize the electric grid. But developing new copper mines is expensive and can take up to a decade, making it difficult for supply to quickly respond to rising demand. Global copper mine production fell 1.1% in the first half of 2026, according to data from the International Copper Study Group. Meanwhile, copper prices on the London Metal Exchange have climbed above $14,500 per metric ton to record highs. Freeport gives us significant leverage to higher copper prices If I’m bullish on copper, I want to own a company that can really benefit when prices rise. Freeport fits that profile. Sustained higher copper prices can translate into disproportionately stronger earnings and cash flow. The company generated about $2 billion in operating cash flow in the second quarter and expects roughly $8.3 billion for the full year, based on its commodity-price assumptions. FCX YTD mountain Freeport-McMoRan, YTD Production is recovering just as prices surge One of the most important company-specific catalysts is the recovery of Freeport’s Grasberg Block Cave operation in Indonesia. Lower operating rates have weighed on copper production, but management says the ramp-up is progressing on schedule. That creates an attractive setup: recovering production while copper prices remain historically high. I don’t need copper to keep setting records for this investment to work. If Freeport can keep producing more at these prices, that gives us another way to win. Why now? I wouldn’t call Freeport a traditionally cheap stock. And the stock has already had quite a run, up nearly 50% so far in 2026 and a little more than 9% in the past one month alone. At our purchase price of $72.50, it trades for a seemingly lofty 26 times expected 2026 earnings. But based on roughly $3.75 in expected 2027 earnings per share, that multiple falls to about 19 times, below its 10-year average. To me, that’s the opportunity. Bottom line Freeport comes with real risks, from swings in copper prices to potential setbacks at Grasberg. But at our purchase price, I think the potential reward makes those risks worth taking. Copper demand is entering a multi-year period of growth while significant new mine supply remains difficult to bring online. Freeport gives us direct exposure to that trend. Disclosures: Simpson owns in Capital Wealth Planning. 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