Security, redundancy and domestic capacity are changing where capital is deployed, but greater spending does not guarantee stronger investment returns.
For much of the past three decades, businesses pursued a straightforward objective: produce more efficiently, source from the lowest-cost suppliers, and minimize excess capacity. In tandem with this objective, global supply chains became increasingly specialized. With just-in-time inventory systems reducing costs, companies concentrated production in locations offering the greatest economies of scale.
That model delivered substantial benefits; it also created dependencies that have become harder to ignore during sustained periods of geopolitical tensions, trade restrictions and energy disruptions.
Now, governments and businesses are placing greater value on economic security, even when achieving it requires higher upfront investment. For investors, this shift is changing where capital flows, but it also raises an important question: which businesses are likely to benefit financially from these investments?
Efficiency is no Longer Enough
The International Energy Agency’s Global Critical Minerals Outlook 2026 projects strong growth in demand for minerals used in energy technologies. The same outlook highlights the geographic concentration of mining and refining, which can leave industries exposed to a disruption in one major processing location.¹
The challenge extends beyond extracting raw materials to processing facilities, specialized equipment, technical expertise and manufacturing capacity. Building alternative supply chains requires investment across the production process, often with substantial capital requirements and long development timelines.
For example, a company may accept higher procurement costs, hold additional inventory or maintain a second supplier to reduce its dependence on a single source. These measures help limit the impact of supply disruptions, but their financial value depends on whether the additional costs are justified by the risks they help mitigate.
Investment Priorities are Changing
This shift is influencing capital spending across electricity grids, transportation infrastructure, industrial automation, cybersecurity, critical minerals and domestic manufacturing.
The 2024 Draghi report on European competitiveness estimated that the European Union would need hundreds of billions of euros in additional annual investment to support its energy, digital, defence and security priorities.² Canada is pursuing similar objectives through its Critical Minerals Strategy, which emphasizes domestic production, processing, manufacturing and recycling, as well as supply relationships with international partners.³
Investment in these areas can serve several purposes:
These investments may create sustained demand for infrastructure, equipment and specialized services. However, growing demand does not guarantee that every company supplying them will generate attractive returns.
A Growing Market Does Not Guarantee Attractive Returns
For example, a government commitment to expand domestic mineral processing can create demand for new facilities and equipment. However, projects still require substantial upfront investment, face lengthy permitting processes, and encounter cost overruns before generating revenue.
Exhibit:
Even when demand materializes, profitability depends on the competitive environment. An industry experiencing rapid investment might eventually develop excess capacity, putting pressure on prices and returns. While government support in the form of subsidies, procurement commitments and other incentives can improve project economics, changes in policy or funding also affect their value.
For investors, a growing industry does not necessarily mean that every company operating within it will be an attractive investment. A company’s ability to generate cash flow, manage financing costs and compete effectively remains important. Strategic importance may support demand, but it does not eliminate commercial risk.
The Implications for Investors
The shift toward economic resilience is likely to influence investment priorities for years to come. However, a business operating in a strategically important industry is not necessarily an attractive investment. What matters is whether growing demand can translate into sustainable earnings, particularly when projects require substantial capital, face long development timelines or depend on government support. For investors, understanding that distinction is as important as recognizing the broader economic trend.
Sources
1. International Energy Agency, Global Critical Minerals Outlook 2026.
2. European Commission, The Draghi Report on European Competitiveness.
3. Government of Canada, The Canadian Critical Minerals Strategy.
