Why Pan American Silver (PAAS) Falls Short in the AI-Driven Energy Revolution

The global economy is undergoing a seismic shift, driven by the rise of artificial intelligence (AI) and the urgent demand for energy infrastructure to power it. While traditional commodities like silver remain relevant, Pan American Silver (PAAS) is increasingly at odds with the transformative forces reshaping investment landscapes. This article argues that PAAS’s reliance on volatile silver prices and operational headwinds makes it an inferior play compared to AI-driven energy infrastructure stocks, which are positioned to capture explosive growth in data center power needs, nuclear energy, and U.S. LNG exports. Investors ignoring this shift risk missing out on safer, higher-return opportunities.

The AI/Infrastructure Opportunity: Where the Future Lies

The AI era is not just about software—it’s an energy-hungry beast. Data centers now consume 2% of global electricity, a figure projected to double by 2030. Meanwhile, AI’s demand for advanced materials like rare earth metals and silicon wafers is dwarfed by its need for stable, scalable energy. This creates a trifecta of opportunities:
1. Nuclear Energy: Next-gen reactors offer carbon-free power at scale, with U.S. firms like X-energy and NuScale advancing designs.
2. LNG Exports: The U.S., the world’s top LNG producer, will supply Asia’s energy-hungry AI hubs, benefiting companies like Cheniere Energy (LNG).
3. Grid Upgrades: Utilities like NextEra Energy (NEE) and Dominion Energy (D) are modernizing grids to handle AI’s 24/7 power demands.

These sectors are not just growth plays—they’re necessities. Governments globally are prioritizing energy security, with the U.S. alone allocating $62 billion in 2022 for grid resilience and clean energy. By contrast, silver’s role in this transition is marginal, confined to niche uses like solar panels and EV batteries.

PAAS’s Flaws: Silver’s Limits and Operational Stumbles

While AI infrastructure stocks thrive, PAAS faces a trifecta of challenges that limit its upside:

1. Silver’s Shrinking Relevance

• Demand Dynamics: Silver’s industrial use in electronics and solar panels accounts for 40% of demand, but AI’s energy needs favor energy infrastructure, not conductive metals.
• Price Volatility: Despite Q1 2025 silver prices hitting $31.25/oz, PAAS’s stock fell due to fears of a supply glut. The text reveals that PAAS’s valuation is not tied to long-term structural demand, unlike energy stocks benefiting from policy tailwinds.

2. Operational Headwinds

• Production Delays: The Escobal mine in Guatemala remains closed, with no timeline for reopening. This undermines PAAS’s ability to boost production, critical for outperforming peers.
• Cost Pressures: While PAAS cut costs to $13.94/oz AISC, its cash reserves of $923 million pale against the liquidity of energy giants.

3. Missed Growth Opportunities

PAAS’s capital allocation to projects like La Colorada Skarn ($3 million in Q1) and Jacobina optimization ($4.8 million) pales against the capital intensity of energy infrastructure. For example, a single data center can require $1 billion in energy infrastructure investments.

The Data Speaks: PAAS vs. AI/Infrastructure Performance

The visual above highlights PAAS’s underperformance. While the IBATS ETF (tracking AI, cloud, and energy infrastructure stocks) surged +45% since early 2023, PAAS declined -12% despite higher silver prices. This divergence underscores the market’s preference for transformative sectors over commodity plays.

Why Pivot Now? The Case for AI/Infrastructure Leadership

1. Lower Risk, Higher Returns: Energy infrastructure stocks offer stable cash flows from long-term contracts (e.g., LNG export terminals), unlike PAAS’s exposure to silver’s price swings.
2. Policy Tailwinds: The U.S. Inflation Reduction Act (IRA) provides $369 billion in subsidies for clean energy, while the CHIPS Act funds semiconductor (AI hardware) factories.
3. Valuation Discounts: Many energy infrastructure stocks trade at 8–10x EV/EBITDA, far below PAAS’s 15x EV/EBITDA, despite stronger growth prospects.

Conclusion: The Write-Off of PAAS and the Buy Signal for Energy Leaders

Pan American Silver’s stock is a relic of an older economic era. Its reliance on a commodity with dwindling growth relevance and operational bottlenecks makes it a poor bet against the AI/energy revolution. Investors should reallocate capital to infrastructure leaders like NEE, LNG, and X-energy, which offer superior risk-adjusted returns.

The next decade belongs to those who power the AI revolution, not those digging for silver in a world hungry for energy. Act now—before the shift becomes irreversible.

Note: Always conduct independent research and consult a financial advisor before making investment decisions.