To: Commodities Investment Committee
From: Commodities Research Lead
Date: February 21, 2026
Subject: Silver-to-Copper Substitution and AI-Driven Structural Demand Assessment

Current 2026 data indicates a diverging reality in the silver market: while the photovoltaic (PV) sector is successfully implementing aggressive thrifting, new demand from the AI data center boom and a physical inventory crunch are maintaining a structural supply deficit. Technological thrifting is mitigating, but not yet offsetting, the supply gap.

### PV Sector: Silver-to-Copper Substitution Dynamics

China, controlling 80 percent of global PV manufacturing, has reached a tipping point in Q1 2026. Record silver prices, which peaked near 84 dollars per ounce in late 2025 and are averaging 81 dollars in 2026, have forced a material shift in metallization strategy.

* Substitution Milestones: LONGi Green Energy and Jinko Solar have initiated mass production of copper-metallized cells in Q2 2026. This is technically feasible primarily in Back-Contact (BC) architectures where copper’s oxidation risks are more manageable than in mainstream TOPCon designs.
* Thrifting Velocity: Silver intensity in TOPCon cells has dropped from roughly 13 mg/W in 2024 to approximately 7.5 mg/W in 2026. Silver now represents 14 to 29 percent of total PV module costs, up from 5 percent in 2023.
* Net Impact: BloombergNEF and the Silver Institute project a 7 percent year-on-year decline in total PV silver demand for 2026 (approximately 194 million ounces), despite a 15 percent growth in global solar installations.

### AI and Data Center Demand: The New Structural Floor

AI infrastructure is emerging as a price-inelastic consumer of silver, counteracting the savings achieved in the solar sector. Silver's superior thermal and electrical conductivity makes it essential for high-performance computing (HPC) hardware.

* Infrastructure Spend: Hyperscalers (the Big Five) are projected to spend 630 billion dollars on capital expenditures in 2026, with 450 billion dollars dedicated specifically to AI infrastructure.
* Hardware Consumption: Silver demand in the electronics segment is driven by Nvidia-architecture servers and GPUs. High-voltage AI data centers utilize silver in power distribution units and connectors due to its oxidation resistance and thermal efficiency.
* Growth Rate: While solar silver demand is forecast to shrink by 7 percent, AI-related electronics and data center demand is projected to grow at a compound annual rate exceeding 8 percent.

### Supply Crunch and Thrifting Efficacy

The "structural supply crunch" remains the dominant market force in 2026. Despite technological thrifting, the market is entering its sixth consecutive year of deficit.

* Deficit Projections: The Silver Institute forecasts a 2026 supply shortfall of 67 million ounces. While total supply is expected to hit a decade high of 1.05 billion ounces (up 1.5 percent), it cannot keep pace with the combination of industrial demand and a 20 percent surge in physical investment.
* Inventory Depletion: Physical stocks on the COMEX and LBMA have reached critical lows. In January 2026, roughly 26 percent of COMEX registered inventory was withdrawn in a single week, signaling a shift from paper-based trading to physical hoarding.
* Substitution Limits: Copper substitution remains hindered by technical hurdles in TOPCon cells, which still command 70 percent of the 2026 market. Oxidation and diffusion-related degradation in copper-based cells require expensive barrier layers that can negate the raw material savings.

### Assessment Summary

Technological thrifting in the Chinese PV sector is a vital pressure valve, but it is not a cure for the supply crunch. The "saved" silver from solar manufacturing is being rapidly absorbed by AI infrastructure and retail investors seeking a hedge against currency volatility. We expect silver to maintain a high price floor of 75 to 80 dollars per ounce through 2026, as the AI-driven "regime change" in valuation outweighs the gains from industrial substitution.
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