Analysts indicate that electricity infrastructure and artificial intelligence (AI) are driving a substantial increase in copper demand, offering investors a new rationale for positioning in the mining sector, with Australian mining stocks poised to extend their rally.

Over the past year, the mining sector has been the strongest performing sub-sector within the S&P/ASX 200 Index, and it is now gradually moving away from the long-dominant iron ore, as mining companies increasingly pivot toward copper in pursuit of growth.

BHP Group Ltd (ASX: BHP) has benefited from copper prices hitting record highs, with copper revenue exceeding half of its total annual revenue for the first time, while Fortescue Ltd (ASX: FMG), whose primary business is iron ore, continues to see declining profits.

As AI data centers, electrification, and power grid expansion drive copper demand, while a sluggish property market weighs on iron ore demand, this sector-wide shift in focus is expected to accelerate further.

Australia's leading mining companies are steadily increasing their copper asset exposure, moving away from a sole reliance on iron ore, their traditional pillar commodity.

"The core point is that copper demand is growing while iron ore demand is not, and the market is pricing this in," said David Tuckwell, Chief Investment Officer at ETF Shares in Sydney.

Judging from the latest financial reports of Australia's top miners, "the transition toward copper has well and truly materialized."

BHP is not the only company seeking to expand its share of the global copper market. Peers such as Rio Tinto Ltd (ASX: RIO) are pursuing similar strategies, attempting to capitalize on the copper price upside driven by tight supply, AI-fueled demand, and tariff-related trade disruptions.

BHP's move to increase its copper exposure was the underlying motivation behind its attempt to acquire Anglo American Plc, although that acquisition proposal fell through last year.

The divergence between copper and iron ore market performance is becoming increasingly pronounced. As major Asian real estate markets struggle to recover from the post-pandemic downturn, iron ore prices have remained relatively subdued.

However, some analysts believe that in the Australian market, investors looking for pure-play copper exposure have limited options.

"If you want large-scale, high-quality copper mining assets, the ASX is not the first choice," said Dylan Kelly, Head of Research at Terra Capital Holdings.

For "large copper producers with long mining cycles, extremely low costs, and abundant targets, you need to look to Canada," he said, adding that his company holds a small position in Perth-based FireFly Metals Ltd.

Even so, increasing copper mining asset exposure still offers investors a new avenue to participate in the current AI bull market — a wave that is driving global stock markets to repeatedly hit new highs while also providing room for further gains in Australian mining stocks.

As investment in data centers and power grid construction accelerates, copper demand is expected to continue rising, while proposed U.S. tariff policies and declining copper mine output in Chile further intensify supply-side pressures.

"The copper industry as a whole is already experiencing a structural supply deficit," said Jessica Leung, Portfolio Manager at Global X Management.

Coupled with the metal's growing demand from AI buildout, the Australian mining sector is now pivoting toward "what they see as the next phase of growth."