Silver's 50% Slide Pressures Producers as AI Demand Fails to Halt Drop

Silver has fallen roughly 50% from its January peak above $115 an ounce, settling near $58. The decline has hit producers like First Majestic Silver, Wheaton Precious Metals, and Pan American Silver, whose shares have dropped even as some posted stronger production numbers.

The rally that started in April 2025 lifted silver from about $29 to more than $115 over nine months, driven by expectations that AI data center construction would suck up huge volumes of the metal. Data centers use silver in thermal paste, photovoltaic cells, and electromagnetic shielding. Supply has not kept up. Mine output has grown slowly for years, leaving the market reliant on above-ground stocks to meet demand.

Now the price has halved, and the read-through for producers is mixed. First Majestic Silver reported higher silver and gold production in the second quarter and raised its 2026 production guidance. Its stock still fell, reflecting the market's focus on the metal price rather than the company's operational progress. Pan American Silver reports second-quarter results on Aug. 12; Wheaton Precious Metals reports on Aug. 6.

The sell-off mirrors a broader reassessment of AI infrastructure spending. Investors have been questioning whether the massive capital expenditure from hyperscalers will deliver returns. McKinsey estimates that global data center spending could reach $7 trillion by 2030. Major spenders including Meta Platforms, Amazon, Alphabet, and Microsoft have so far maintained their plans, according to recent earnings calls.

Microsoft, with an Alpha Score of 68 and a stock price of $455.40, continues to add cloud capacity. The company's Azure growth and data center build-out remain on track, executives said in July. That suggests silver demand from the sector has not collapsed, even if the metal's price has.

For silver producers, the question is whether the current price floor holds. The iShares Silver Trust, the largest physically backed silver ETF, has fallen in line with the spot price. Some analysts argue that the long-term demand story – AI data centers, solar energy, and industrial electronics – remains intact, but the short-term price action is dominated by macro sentiment and position unwinding.

First Majestic's production report showed the company is well placed to benefit if prices recover. The company said it expects higher output in the second half of 2026, pointing to new mines ramping up. But with silver at $58, margins are thinner than they were at the peak.

Pan American Silver's Aug. 12 report will give the next data point. The company operates multiple mines in Mexico and Peru, and its cost structure is sensitive to by-product credits from gold and zinc. Wheaton Precious Metals, a streaming company, has a different model: it buys metal at a fixed low price and sells at spot, so its margins are directly tied to the silver price.

Investors watching this sector should track the next earnings dates and the weekly silver inventory data from the COMEX and the Shanghai Futures Exchange. A sustained drop below $55 would test the costs of many primary silver mines, potentially triggering production cuts that would eventually support prices.

For now, the hyperscalers' spending plans are the most tangible support for the silver thesis. The Aug. 12 and Aug. 6 reports will show whether the producers' own outlooks align with that view.