Highlights

• AI and cloud computing expansion triggers massive demand for rare earth elements and critical minerals, concentrated in geopolitically sensitive regions.
• Data center growth creates environmental and social challenges, particularly around water usage, energy consumption, and extraction impacts.
• The AI infrastructure narrative now encompasses complex intersections of technology, mineral supply chains, geopolitical competition, and sustainability.

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The surge in artificial intelligence (AI) and cloud computing has triggered a global buildout of data centers—and with it, a sharp rise in demand for rare earth elements, lithium, cobalt, and other critical minerals. Lauro Accioly Filho’s (opens in a new tab) recent LSE analysis connects the dots between high-tech server farms and the extractive industries of the Global South, underscoring how digital infrastructure rests on a mineral supply chain marked by environmental degradation, labor exploitation, and geopolitical competition.

Rare Earth Exchanges has covered multiple scenarios involving huge demand for rare earth elements based on the explosive growth of AI and data centers.

AI hardware—servers, cooling systems, batteries, and networking gear—depends on rare earths and related critical minerals. The author notes that while these minerals are essential to green energy and national security, their extraction and refining are concentrated in a handful of countries, many under Chinese processing dominance. This structural dependency is already shaping U.S.–China rivalry, spurring moves like Washington’s Minerals Security Partnership to diversify supply.

Also, the growth will lead to a local U.S. environmental toll. Massive data center projects in Nevada and other states—often sited on or near Indigenous lands—consume huge volumes of water and electricity. Similar developments across Indiana, Missouri, and Virginia have prompted grassroots resistance, with communities challenging energy use, water rights conflicts, and opaque siting processes.

Why This Matters for Rare Earth Investors

For retail investors, the AI-driven data center race is a double-edged signal:

1. Demand Catalyst – Growth in AI and cloud computing could lock in sustained demand for NdPr magnets, rare earth phosphors, and other critical inputs.
2. Policy & ESG Pressure – Scrutiny over environmental and social impacts could lead to tighter permitting, higher compliance costs, or shifts toward secondary/recycled supply chains.

Unanswered, High-Impact Questions

• Will U.S. and allied policies prioritize domestic REE refining capacity to meet AI-sector demand, or will reliance on Chinese midstream processing persist?
• Can recycled rare earth magnets and other circular-economy solutions scale quickly enough to ease the mineral footprint of AI infrastructure?
• How might community resistance to water- and energy-intensive data centers delay or redirect AI-related mineral demand?
• Could ESG mandates from major tech firms alter procurement strategies, affecting price stability and offtake terms for miners?

The AI infrastructure story is no longer just about code and algorithms—it is about mines, minerals, and the geopolitics of supply.

The local and global environmental footprint of the AI-driven boom in data centers,” London School of Economics USAPP Blog, Aug. 7, 2025