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Raw Materials for AI Data Centers: Risks & Resilience Strategies

  • Writer: Virtual Gold
    Virtual Gold
  • Aug 19, 2025
  • 8 min read

The rapid expansion of AI data centers is driving unprecedented demand for specialized hardware and infrastructure, each reliant on a complex web of raw materials. From the silicon in AI chips to the copper in power cables and rare earths in cooling systems, these materials form the backbone of AI infrastructure. However, surging demand, concentrated production, and geopolitical tensions are creating significant supply chain risks for several critical inputs over the next five years (2025–2030). This article examines the key raw materials required for AI data center subsystems—chips, servers, cooling, networking, and energy systems—and evaluates which supply chains are at risk of failing to meet AI-driven demand, alongside strategies to mitigate these vulnerabilities.


Raw Materials for AI Data Center Subsystems

AI data centers are intricate ecosystems, with each subsystem requiring specific materials to function effectively. Below, we outline the primary materials and their roles in five key areas.


AI Chips and Semiconductors

AI chips, including GPUs, CPUs, and accelerators, are the computational heart of data centers. Silicon is the foundational material, derived from quartz sand and processed into ultra-pure wafers for chip fabrication.


Other critical inputs include:

  • Neon and rare gases (krypton, xenon) for excimer lasers in photolithography, essential for patterning chips.

  • Gallium and arsenic for compound semiconductors like gallium arsenide (GaAs) and gallium nitride (GaN), used in high-frequency amplifiers and power-efficient chips.

  • Tungsten and cobalt for interconnects and contacts in advanced chip designs, improving electrical performance.

  • Phosphorus, boron, and indium as dopants to create transistor junctions.

  • Gold and palladium for bond pads and packaging interconnects.

  • Ultra-pure water for wafer cleaning and cerium oxide for polishing, alongside fluorspar for etchants.


Specialty chemicals like photoresist solvents and Ajinomoto build-up film (ABF) are also critical for chip packaging, with ABF shortages previously disrupting GPU production.


Server Hardware

Servers house the chips and supporting electronics, relying on:

  • Copper for wiring, printed circuit board (PCB) traces, and cabling, with each rack containing kilometers of copper.

  • Steel and aluminum for chassis, heatsinks, and enclosures, leveraging their thermal conductivity and structural strength.

  • Tantalum for capacitors in power management, sourced primarily from Africa.

  • Neodymium and dysprosium in rare earth magnets for hard disk drives (if used) and server cooling fans.

  • Tin, silver, and lead (in lead-free solders) for mounting components on PCBs.


Cooling Infrastructure

AI hardware generates significant heat, necessitating robust cooling systems:

  • Water for evaporative cooling towers, with large data centers consuming 3–5 million gallons daily.

  • Copper and aluminum in heat exchangers, finned coils, and cold plates for liquid cooling.

  • Steel for cooling tower structures and piping.

  • Refrigerants (HFCs, HFOs) derived from fluorspar for vapor-compression chillers.

  • Neodymium in high-efficiency motors for pumps and fans.

  • Fluoropolymer tubing and dielectric fluids for advanced liquid cooling systems.


Networking Hardware

High-bandwidth networking connects servers within and across data centers:

  • Silica glass doped with germanium or phosphorus for optical fibers, with helium used in fiber drawing.

  • Gallium, indium, and arsenic in optical transceivers for lasers and photodiodes.

  • Copper and aluminum in network cabling and switchgear.

  • Gold and palladium for reliable connectors in routers and switches.


Energy Supply and Storage

Powering AI data centers requires robust electrical and backup systems:

  • Copper and aluminum in transformers, busbars, and transmission lines.

  • Lithium, cobalt, nickel, manganese, and graphite in lithium-ion batteries for uninterruptible power supplies (UPS).

  • Neodymium and dysprosium in magnets for wind turbines (for renewable energy) and backup generators.

  • Lead and sulfur in traditional lead-acid UPS batteries.

  • Platinum and palladium in emerging hydrogen fuel cells for carbon-neutral backup power.


Supply Chain Risk Assessment (2025–2030)

Not all materials face equal risk of supply disruption. Below, we categorize key materials based on their risk profiles, highlighting why some are vulnerable and others more secure.


High-Risk Materials

Gallium: Classified as At Risk due to extreme supply concentration, with ~98% of primary gallium produced in China as a by-product of aluminum refining. China’s 2023 export licensing and 2024 de facto U.S. ban have created a global crunch, impacting GaAs and GaN chips critical for power amplifiers and efficient AI server power supplies. Limited global refining capacity and slow scale-up outside China exacerbate the risk. Mitigation includes new refining projects in Germany and Australia and R&D into silicon carbide (SiC) substitutes, but these are years from maturity.


Rare Earth Elements (Neodymium, Dysprosium): Also At Risk, with China controlling ~69% of mining and ~90% of magnet production. These elements are vital for high-efficiency motors in cooling fans and renewable energy generators. China’s 2025 export restrictions signal ongoing geopolitical leverage, with few immediate substitutes for the strongest NdFeB magnets. Efforts to expand mining in the U.S. and Australia and develop magnet-free motor designs are underway but face scalability challenges by 2030.


Cobalt: At Risk due to ~70% of ore mining in the Democratic Republic of Congo (DRC), with 80% of DRC operations controlled by Chinese firms and ~80% of global refining in China. Cobalt is used in high-performance UPS batteries and server alloys. DRC’s unstable governance, child labor concerns, and 2025 export halts heighten risks. The industry is shifting to cobalt-free battery chemistries (e.g., lithium-iron-phosphate) and increasing recycling, but cobalt demand from EVs competes heavily with data center needs.


Potential-Risk Materials

Lithium: Potential Risk due to a ~30% annual demand surge from EVs, grid storage, and data center UPS systems. Mining is concentrated in Australia, Chile, and China (>80% combined), with China dominating ~60–70% of refining. Short-term oversupply in 2023 lowered prices, but deficits are projected by the late 2020s if mining lags. New projects in Argentina and Africa, alongside sodium-ion battery development, mitigate long-term risks.


Graphite: Potential Risk as China produces ~79% of natural graphite and >90% of battery-grade graphite for UPS battery anodes. Export restrictions in 2023 and EV-driven demand raise concerns of shortages. New mines in Mozambique and Canada, synthetic graphite production, and alternative anode materials (e.g., silicon composites) are reducing reliance, but scaling these remains a challenge.


Germanium: Potential Risk with ~60% of production in China, subject to export controls. Used in fiber optics and high-speed SiGe chips, germanium is a zinc refining by-product. Alternative production in Canada and Belgium, recycling from fiber-optic scrap, and silicon photonics development lessen the risk, but supply remains sensitive to Chinese policy.


Copper: Potential Risk due to a projected >40% demand rise by 2040 from data centers, EVs, and grid infrastructure. Supply is concentrated in Chile, DRC, and Peru, with a potential 30% shortfall by 2035 due to slow mine expansion and declining ore grades. Recycling (~30% of current supply) and aluminum substitution in some applications help, but copper’s critical role in wiring and heatsinks makes it a concern.


Neon and Rare Gases: Potential Risk stemming from past disruptions (e.g., Ukraine supplied ~50% of semiconductor-grade neon until 2022). New production in the U.S. and India, gas recycling in chip fabs, and alternative lithography mixes reduce dependency, but geopolitical shocks could still tighten supply.


Tungsten: Potential Risk with >80% of supply from China, which added tungsten to export controls in 2025. Used in chip interconnects and high-performance alloys, tungsten has few substitutes due to its high melting point. Mining in Austria and Vietnam and recycling from scrap carbide tools provide some relief, but supply constraints could impact chip fabrication.


Water: Potential Risk in water-stressed regions (e.g., U.S. Southwest, Taiwan), where data centers and chip fabs consume millions of gallons daily. Climate-driven droughts and local competition for water resources pose risks. Water-free cooling (e.g., air-cooled chillers) and recycling (e.g., TSMC’s reclamation plants) are critical mitigations.


Low-Risk Materials

Silicon: Low Risk as silica sand is abundant globally. The constraint lies in wafer fabrication capacity, which is tight through 2026 but expected to expand with new fabs in the U.S. and EU. Industrial policies like the U.S. CHIPS Act support this diversification.

Steel and Aluminum: Low Risk due to globally diversified production (Australia, Brazil, Guinea) and high recycling rates. Price volatility from energy costs or tariffs is possible, but no fundamental scarcity exists. Low-carbon production methods further ensure availability.


Strategic Implications and Mitigation Strategies

The supply chain risks for gallium, rare earths, and cobalt are particularly acute due to their concentrated production and geopolitical vulnerabilities. These materials are critical for AI chips, cooling systems, and energy storage, making their stability essential for scaling AI infrastructure. Enterprises must adopt proactive strategies to ensure resilience:


  • Diversify Sourcing: Engage multiple suppliers and prioritize dual sourcing for high-risk materials like gallium and germanium. Forming industry consortia to secure long-term contracts with mineral producers (as seen in the EV sector) can lock in supply.

  • Invest in Substitutes: Accelerate R&D into alternatives, such as silicon carbide for gallium-based chips, cobalt-free batteries, or magnet-free motor designs. These innovations reduce dependency on at-risk materials.

  • Enhance Recycling: Expand recycling programs for copper, cobalt, and rare earths from end-of-life equipment. Battery recycling, in particular, could provide significant secondary supplies by 2030.

  • Stockpile Strategically: Maintain inventories of critical materials like gallium and germanium to buffer against short-term disruptions, as governments are doing with strategic reserves.

  • Optimize Design: Incorporate material-efficient designs, such as modular cooling systems that can switch between water and air cooling, or server architectures that minimize rare earth use in fans and drives.

  • Monitor Geopolitical Trends: Develop supply chain dashboards to track risks, integrating data on export controls, mining investments, and regional stability. This enables proactive adjustments to sourcing strategies.


Conclusion

The AI data center boom hinges on a diverse array of raw materials, from abundant silicon and steel to scarce gallium and cobalt. While silicon, steel, and aluminum face low risk due to diversified supply, materials like gallium, rare earths, cobalt, graphite, and tungsten are at risk or potential risk due to concentrated production, geopolitical controls, and competing demand from industries like EVs. Over the next five years, enterprises must navigate these challenges by diversifying sourcing, investing in substitutes, and leveraging recycling to ensure stable AI infrastructure growth. By integrating material risk into strategic planning, businesses can mitigate disruptions and maintain their competitive edge in the AI-driven economy.


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