This year, the AI server, optical module, and advanced packaging sectors have gained significant momentum. Base metals like copper, aluminum, tin, nickel, and lead, crucial for AI infrastructure, have seen demand and prices surge due to increased consumption. Silver, with its high electrical and thermal conductivity and low contact resistance, has extensive industrial applications, sparking market discussions on 'AI silver demand.' Some optimistic forecasts suggest AI could become a structural driver for silver demand, potentially replicating the impact of solar power on silver's supply-demand gap. However, silver price movements show a weak correlation with the AI industry's performance, remaining primarily influenced by Federal Reserve interest rate cut expectations, geopolitical tensions, and gold prices. This analysis will address three key questions.
First, it will quantify silver usage across the AI supply chain, distinguishing hype from reality.
Second, using solar industry demand as a historical reference, it will assess the true weight of industrial demand in silver pricing.
Third, it will return to a quantitative framework to determine whether silver's price anchor lies in its industrial or financial attributes.
Estimating AI Silver Demand: From Narrative to Numbers
The term 'AI silver' here refers to the silver contained directly in hardware for AI computing infrastructure, covering three main areas: AI servers (including GPUs/ASICs, motherboards, advanced packaging substrates), high-speed data center optical modules (800G/1.6T/3.2T), and data center infrastructure. Using 2025 as a baseline, we estimate demand by segment.
AI Servers: Global AI server shipments for 2025 are projected between 1.8 and 2.1 million units, with a base assumption of 2 million. Silver usage is concentrated in five areas: advanced packaging/substrates, motherboards/multi-layer PCBs, power modules, high-speed connectors, and thermal management. Advanced packaging substrates and motherboards account for over 60% of the total silver per server. Due to higher computing density, power consumption, and interconnect requirements, AI servers use significantly more silver than traditional ones. Our calculations estimate approximately 150 grams of silver per AI server. Based on 2 million units, total AI server silver demand for 2025 is approximately 300 metric tons.
High-Speed Optical Modules: Global shipments of 800G optical modules in 2025 are estimated at 18-20 million units. Shipments of 1.6T modules are projected at 2.5-6 million units. Mid-to-low speed modules (400G/200G/100G) will also be deployed in AI data centers, with total shipments around 20 million units. Industry research indicates average silver usage of 0.15 grams for 400G and below modules, 0.9-1.0 grams for 800G modules (due to more channels and larger PCB area), and 1.3-1.5 grams for 1.6T modules. Aggregating these figures, total optical module silver demand is approximately 30 tons.
Data Center Infrastructure: Large AI data centers have far higher reliability requirements for power distribution and cooling than traditional ones. 2025 is a pivotal year for the transition from air to liquid cooling. Silver is used in power distribution/management systems and liquid cooling systems. Assuming an average consumption of 500 kg of silver per new or expanded AI data center, with an estimated 160 such facilities globally in 2025, infrastructure silver demand is approximately 80 tons.
Summing these three segments: AI Servers (300 tons) + Optical Modules (30 tons) + Infrastructure (80 tons) = 410 tons of total AI silver demand in 2025. AI servers are the dominant contributor, accounting for over 70%. Compared to the estimated global silver demand of 35,000 tons in 2025, AI demand represents only about 1.2%. The AI server market is expected to grow around 40% in 2026. Given the current AI boom, our base case assumes a 25% CAGR for AI server shipments from 2025-2028, with optimistic and pessimistic scenarios at 35% and 18%, respectively. Technological advancements like copper substitution, silicon photonics, and thinner silver paste applications may suppress per-unit silver use. Our base case assumes a 2% annual decline, with optimistic and pessimistic scenarios at 1% and 3%, respectively. Under our base case, AI silver demand could exceed 1,200 tons by 2030, and approach 2,000 tons in the optimistic scenario.
Globally, due to slowing solar installation growth and silver-thrifting technologies, total silver demand is expected to decline slightly. AI's share of demand could rise from the current 1.2% to around 4%. This indicates AI silver is a real but minor incremental demand source. It may marginally tighten the silver supply-demand balance but is far from sufficient to independently drive a sustained price trend. Its limited share and incremental growth make it an unlikely primary driver for higher silver prices.
Historical Review: The Real Impact of Solar Silver Demand on Price
In recent years, global efforts to develop new energy have led to explosive growth in solar installations, significantly boosting silver demand and contributing to a supply deficit for six consecutive years. By reviewing the relationship between this price increase and industrial demand led by solar, we aim to clarify the role of industrial demand in silver pricing.
2019-2020: Macroeconomic Dominance, Liquidity Lifts Price
Average annual solar silver demand during 2019-2020 was around 2,400 tons, turning positive year-on-year in 2020, though the supply surplus widened that year. The silver price rose slightly in 2019, averaging around $16/oz. The real turning point was 2020. The COVID-19 pandemic devastated the global economy. The Fed began aggressive rate cuts in March 2020, slashing the federal funds rate by 125 basis points to 0.5% and launching quantitative easing. Amidst loose monetary policy and massive liquidity injections, the London spot silver price rose from around $16 to over $25, gaining over 60% for the year. During this period, solar silver demand growth was modest, and the supply surplus persisted, yet silver prices surged primarily due to macroeconomic stimulus.
2021-2022: Macro Headwinds Overpower Strong Industrial Demand
This period saw accelerated expansion in global solar silver demand, exceeding 2,700 tons in 2021 and accelerating to 3,600 tons in 2022, a CAGR over 30%. From 2021, the global silver market entered a supply deficit, which reached a historical extreme in 2022. Macro-wise, pandemic supply chain disruptions and the oil price spike following the Russia-Ukraine conflict drove rapid US inflation. The Fed formally entered a hiking cycle in April 2022, raising rates by 425 bps within the year. Real rates quickly turned positive, and the US Dollar Index surged above 110. London spot silver fell from around $30 at the start of the year to a low near $18, a drop exceeding 60%, with the annual average falling to $21/oz. During this time, the high-rate, strong-dollar macro environment created headwinds. Despite record industrial demand growth and a historic supply deficit, silver prices fell. The solar demand narrative could not counteract Fed tightening.
2023-2024: Industrial Demand Provides a Floor, Macro Limits Upside
Global solar silver demand reached a historical peak during 2023-2024, surpassing 6,000 tons in 2024. The silver market recorded a structural deficit for four consecutive years, with a cumulative 2021-2024 deficit of 21,000 tons (equivalent to 10 months of mine production). Yet, prices did not rise solely due to tight demand. In 2023, silver traded between $20-$26. In 2024, the average rose to around $28, with a yearly high of $35 driven by Middle East geopolitical避险 sentiment and Fed cut expectations, not purely by tight supply. During a hiking cycle, the opportunity cost of holding non-yielding assets like silver caps prices. Even with structural deficits, industrial demand primarily served as a floor—providing support near production costs—but sustained upward breaks required supportive macro conditions.
2025-Present: Macro and Industrial Demand Align, Solar Adds a Boost
According to World Silver Institute data, global solar silver demand in 2025 is approximately 5,800 tons, down 6% year-on-year. The silver market is in its fifth consecutive year of structural deficit, though the shortfall has narrowed significantly. Macro-wise, from late 2024, Fed cut expectations warmed, culminating in a 50 bps cut in September 2024, initiating an easing cycle. Concurrently, the 2024 US presidential election saw unexpected twists, with Donald Trump正式当选 in 2025 and announcing reciprocal tax policies in April, significantly increasing market uncertainty. During this period, silver prices surged dramatically, reaching an extreme of $120 in late January, a 300% increase. The core driver of this rally remained macro factors—the rate cut cycle and market uncertainty—with solar demand playing a supplementary, amplifying role.
Solar Case Review and Summary
First, when macro factors are neutral, robust industrial demand (e.g., from solar, electronics, EVs) provides solid cost support for silver. For example, in 2023, despite high Fed rates, silver found strong support at the $20 level, not deeply breaching the rising global all-in sustaining cost (AISC) curve. Growing solar demand highlighted silver's industrial属性 at the bottom.
Second, silver's pricing mechanism exhibits a clear 'financial attributes first' characteristic. During liquidity tightening or dollar strength cycles, even with record industrial demand, prices can remain under pressure. The 2022 case is most telling: solar silver demand grew over 30% YoY, and the supply deficit hit a record, yet prices fell 18% due to Fed hikes. Industrial demand can provide a floor but cannot突破 the macro ceiling.
Third, silver price sensitivity to industrial demand is asymmetric. On one hand, when industrial demand deteriorates (e.g., global manufacturing shutdowns in early 2020 COVID), prices can plummet due to a 'double whammy' of financial panic and demand collapse, falling more sharply than gold. On the other hand, when industrial demand improves, price gains depend on macro配合. If real rates fall and the dollar weakens, solar demand acts as an amplifier. If macro headwinds persist, industrial demand growth is only partially priced in.
Where is Silver's Price Anchor?
Silver possesses both precious and industrial metal attributes. Which dominates its pricing? The solar case analysis shows price movements are more显著 influenced by macro factors. This section uses statistical modeling to systematically identify core drivers.
Correlation Analysis
Examining correlation since 1968, the coefficient between London spot silver and gold prices exceeds 0.9, significantly higher than its correlation with industrial metals like copper or zinc. Statistically, a coefficient above 0.8 indicates high directional一致性 in price changes. This strong link stems from market structure: gold, as the primary safe-haven and central bank reserve asset, reflects changes in global macro liquidity, credit risk premiums, and confidence in the monetary system. Despite industrial demand accounting for over 50% of silver's use, its financial investment属性 anchors its pricing logic largely within the precious metals framework.
VECM Statistical Model
A Vector Error Correction Model (VECM) analysis was conducted using monthly data from April 2006 to April 2026 for variables including London silver, London gold, the US Dollar Index, US real利率, London copper, silver ETF holdings, and the US Manufacturing PMI. London silver was the dependent variable. Variance decomposition shows gold explains 70.56% of silver price variance, indicating silver is fundamentally anchored to gold. The US Dollar Index and US real rates contribute next, reflecting currency and opportunity cost effects. Together, these three explain nearly 78% of silver price variance. The cointegration equation coefficient structure further validates this: a 1% rise in gold price leads to an approximately 1.36% rise in silver's equilibrium price, confirming their联动. In contrast, silver ETF holdings, while in the cointegration space, contribute only 0.03% to forecast error variance—economically negligible—and show an inverse statistical relationship with price in the equation. This suggests ETF investment demand is not an independent long-term pricing driver but rather a passive adaptation to macro-driven pricing outcomes.
The sample was split at 2020 to examine structural changes. In the old cycle (2006–2019), silver pricing was closer to industrial大宗商品 logic, with copper's short-term elasticity at 0.1169, showing some传导力 from industrial demand. In the new cycle (2020–2026), copper's short-term elasticity fell to 0.0382, indicating a weaker weighting for industrial attributes, while the explanatory power of macro-financial factors strengthened. This shift aligns with the post-pandemic global宽松 monetary environment. Although the cointegration coefficient for silver ETFs expanded from 3.18 in the old cycle to 11.32 in the new, its variance contribution remained low at 1.80%, far below gold's core role (约72% contribution in the new cycle).
In summary, silver's pricing framework shows a clear evolution: 'macro主导, industrial退潮, financial渗透.' Long-term equilibrium is anchored by gold and dominated by macro forces like the dollar and real rates, a trend that deepened post-2020. However, combined evidence from cointegration and variance decomposition indicates silver retains its dual 'gold shadow + industrial base'复合属性, with ETF demand's marginal influence rising.
Market Analysis and Outlook
We estimate global AI silver consumption at approximately 410 tons in 2025 under a narrow definition. Even maintaining a 25%+ CAGR from 2026-2030, AI demand may reach 2,000 tons by 2030, still less than 4% of the estimated annual global silver demand of 30,000 tons. This 'new narrative' of industrial demand is insufficient in scale to independently drive a sustained silver price trend.
The review of solar demand's impact from 2019 onward shows global solar silver use grew from约2,000 tons to over 6,000 tons—a 200%+ increase—yet同期 price fluctuations remained primarily macro-driven. Surging solar demand acted as a 'floor' during pullbacks and an 'amplifier' during rallies, not an independent pricing factor.
Quantitative analysis of silver's pricing framework confirms precious metal attributes take precedence, with industrial demand providing supplementary support. The correlation between silver and gold remains above 0.9 long-term, and its negative correlation with the dollar and real rates is significantly stronger than its link to industrial demand indicators. During macro liquidity tightening cycles, even with strong industrial demand (e.g., solar and electronics in 2022), silver prices fell alongside gold. During monetary宽松 cycles, industrial demand improvement becomes a 'leverage' for silver to outperform gold.
Current Market Sentiment is Cautious
Given that financial attributes primarily determine silver's price, the current market has shifted from pricing the end of the Fed's cutting cycle to pricing the start of a hiking cycle. Following last Friday's non-farm payrolls data, market pricing for a Fed rate hike this year officially exceeded one, sustaining a pessimistic macro mood, a key reason for recent precious metals weakness.
Fundamentally, since January's announcement of a暂不对白银等贵金属加征税, the紧张情绪 in the London spot market has eased significantly. US COMEX silver inventories saw substantial outflows, while London and Chinese inventories recovered, pushing silver lease rates lower. The 1-month lease rate has dropped notably, but 6-month and 1-year rates remain above historical averages,暗示中长期实物供需偏紧. The tight delivery logic that previously supported prices is less urgent. May, a traditional delivery month, saw only over 6,000 COMEX silver delivery notices, far below last year's 15,000. June is not a major delivery month, so the tight delivery thesis awaits验证.
Short-term, with the US-Iran conflict unresolved, interest rate trading has regained focus. Current investor pricing for Fed hikes may be overly pessimistic, but adjustment may take time. As gold and silver have breached key technical levels, a观望 stance is advised. Silver should still be viewed as a high-beta alternative to gold. AI and new energy silver demand provide long-term bottom support, but a sustained trend requires confirmation of macro宽松 signals. The long-term bull case for precious metals remains intact: rising global sovereign credit risk, geopolitical polarization, and de-dollarization provide structural support. The US-Iran conflict exacerbates US fiscal压力 and damages ally interests, accelerating cracks in the old international order. Silver is still poised to follow gold higher, while persistent supply deficits provide fundamental support.
Risks include US-Iran conflict escalation and excessive AI investment狂热.