Double Take hosts Rafe Lewis and Jack Encarnacao are joined by industry experts to discuss insights from the Data Center World trade show in Washington, DC, focusing on the intersection of artificial intelligence (AI) and data center infrastructure.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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The uncertainty surrounding the current US administration’s evolving tariff and trade policies, and the ensuing trade war between the US and China, has rippled through financial markets, weighing on investor sentiment and fueling concerns over the direction of the global economy. While the White House generally excluded energy commodities from the extensive new import tariffs announced on April 2—and largely paused a week later—energy markets were not immune from their impacts. Fears of reduced energy demand and the risk of a recession have caused oil prices to dip over the last few weeks. In addition, the evolving nature of US tariff policies have prompted energy executives to withhold spending, further dragging on demand.

Despite the recent underperformance, our outlook on the oil and gas industry remains constructive. While sentiment has been weak, there has been no meaningful impact on demand at this point, according to industry data. We believe the supply-driven characteristics of the current commodity cycle, coupled with the US administration’s pro-growth stance, suggest that commodities are likely to see higher prices in the coming years.

Supply-Driven Commodity Cycle

Actions by the current US administration can undoubtedly sway commodity prices in the short term, with potential for both positive and negative effects; however, their overall impact on the long-term trajectory of the commodity cycle is likely to be minimal, in our view.

The commodities market tends to operate in cycles that typically span 10 to 12 years. Most recently, we ended a down cycle and began an up cycle in 2020, following the initial impact of the Covid-19 pandemic. We are currently in year five of a cycle that has been predominantly driven by supply-versus-demand factors. Unlike the early 2000s, when economic expansion in China caused commodity demand to surge, this cycle has been a product of supply constraints. Following years of underinvestment, the lack of capital expenditure (capex) in the oil and gas sector has led to tight supply and higher prices. As companies continue to hold the line on capex in the wake of US tariffs, we expect this trend to continue.

Actions by the current US administration can undoubtedly sway commodity prices in the short term, with potential for both positive and negative effects; however, their overall impact on the long-term trajectory of the commodity cycle is likely to be minimal, in our view.

Infrastructure and Demand Growth

Despite the negative impact of tariffs, there has been a positive trend in US energy demand, driven by the construction of new infrastructure. We see companies building new plants, tech facilities and production capabilities, which are all demand-intensive. For instance, a multinational automotive giant just opened a new manufacturing facility for electric and hybrid vehicles in Georgia, representing the greatest single investment in the state’s history. Large-scale infrastructure developments such as this could lead to increased demand for commodities.

Natural Gas and Electricity Demand

US electricity demand grew in 2024 for the first time in two decades, while the era of energy efficiency improvements—installing smart thermostats and switching to LED lightbulbs—appears to be waning. We are now witnessing a return to a gross domestic product-linked electricity growth profile. Additionally, the rise of artificial intelligence (AI) has substantially boosted global electricity requirements.

Natural gas has emerged as a key component in meeting this growing appetite for electricity in the short term. The natural-gas industry, particularly in the US, has seen an upsurge in consolidation in recent years, as companies aim to increase operational efficiencies, gain access to resources and reduce costs. The rise in merger-and-acquisition activity has led to an overall reduction in production and capacity, with more assets in the hands of large public companies prioritizing financial performance and shareholder value over growth. By increasing capital discipline, and thereby by limiting investments in new projects, these companies may constrain overall supply.

Additionally, liquefied natural gas export capacity is expected to double over the next five years. The increase in outlets for supply is likely to put upward pressure on domestic natural-gas prices. Following a winter of frigid temperatures across much of the US, inventories are currently below five-year averages.

Commodities Versus Stocks

Commodities, as represented by the S&P GSCI, have recently broken a multi-year downtrend versus stocks, as represented by the S&P 500.¹ We believe that commodities can provide a compelling source of alpha and return generation. They may also offer downside protection during market downturns, as we saw during the sell-off in early April.

Oil equities are currently offering free cash flow yields of 12-15% at a $70 per barrel oil price², which is considered the floor price for oil, in our view. If the $70 floor is accurate, as oil prices rise, these stocks are likely to become even cheaper. Furthermore, company fundamentals have improved; many companies are now better managed and focused on return on capital, which adds to their potential upside. Additionally, relative to past oil sell-offs, we believe that the recent decline in oil equities is overdone.

Key Drivers of the Commodities Market

The commodities market is a dynamic and often unpredictable space, influenced by myriad factors ranging from geopolitical events to technological advancements. The current US administration’s pro-US growth agenda could lift demand for commodities, as could any fiscal stimulus that European and Chinese governments implement in response. Conversely, US tariffs and the ongoing trade conflict with China could drag on commodity demand.

While the uncertainty surrounding the US administration’s evolving policies has affected financial markets and investor sentiment, we believe the long-term trajectory of the commodity cycle remains largely unaffected. The market has been structurally undersupplied for years due to a lack of funding for new production, growth projects and infrastructure. In addition, the construction of new infrastructure and the rise of AI have driven positive trends in US energy demand, particularly for natural gas and electricity. We believe these conditions are likely to support higher commodity prices through 2025.

¹ Source: Bloomberg, April 29, 2025

² Source: Newton, March 27, 2025

Bruce Mehlman, an experienced Washington lobbyist, joins Double Take to discuss the complexities of corporate lobbying in the current political environment, including how businesses are navigating uncertainties and the implications for investors.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Bruce Mehlman, an experienced Washington lobbyist, joins Double Take to discuss the complexities of corporate lobbying in the current political environment, including how businesses are navigating uncertainties and the implications for investors.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Kirsten Bartok Touw, a defence investor and thought leader, joins Double Take to dig into the trenches of US defence spending. She illuminates the need for faster innovation, more autonomous systems and incorporation of commercial technologies.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Kirsten Bartok Touw, a defense investor and thought leader, joins Double Take to dig into the trenches of US defense spending. She illuminates the need for faster innovation, more autonomous systems and incorporation of commercial technologies.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Joe Corrado, a veteran small-cap investor who recently retired from Newton Investment Management, joins Double Take to share his extensive insights on the evolution of small-cap investing and strategies for navigating current market challenges.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Joe Corrado, a veteran small-cap investor who recently retired from Newton Investment Management, joins Double Take to share his extensive insights on the evolution of small-cap investing and strategies for navigating current market challenges.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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Paul Stimers, partner at Holland & Knight and founder of the Quantum Industry Coalition, joins Double Take to jump into the quantum advantage, cybersecurity implications and the future of this groundbreaking technology.

The podcast is intended for investment professionals ONLY and should not be construed as investment advice or a recommendation. Any stock examples discussed are given in the context of the theme being explored and the views expressed are those of the presenters at the time of recording.

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