Silver's Parabolic Rise: Why Buffett's Bold Thesis Is Playing Out in Real Time

The Market is Proving What Buffett Called in 2023

Warren Buffett didn’t need crystal balls or complex models to forecast silver’s trajectory. At a Berkshire Hathaway shareholder meeting in 2023, he laid out a deceptively simple observation: the world was burning through roughly 150 million more ounces of silver annually than mines could produce. For years, a massive above-ground stockpile had masked this imbalance. But Buffett knew that couldn’t hold forever.

His conclusion was straightforward arithmetic: equilibrium had to restore itself through one of three channels — lower demand, higher supply, or price appreciation. Given industrial demand’s resilience and silver’s inelastic supply (mining output can’t simply ramp up to meet demand spikes), Buffett effectively bet on the third option: “We don’t think that the price change would necessarily be minor.”

That proved prophetic. Silver has surged roughly 150% over the past three years, validating his thesis entirely.

The Supply-Demand Chasm Persists

What’s remarkable isn’t just that prices rose — it’s that the underlying imbalance that triggered them remains intact. Last year, global silver consumption outpaced production by 149 million ounces, marking the fifth consecutive year of structural deficit. Mine output inched up less than 1% in 2024, confirming Buffett’s prediction about supply’s stubbornness.

This persistent gap reveals something crucial: silver’s shortage isn’t a temporary blip but a secular trend driven by unstoppable forces. Solar proliferation, electric vehicle adoption, AI infrastructure buildout, and semiconductor manufacturing are all ravenous silver consumers. The deficit this year alone is expected to exceed 100 million ounces.

Investors seeking exposure to this bull market have typically turned to iShares Silver Trust (NYSEMKT: SLV), which holds physical metal. While effective at capturing silver’s performance, it’s a passive vehicle — it doesn’t amplify gains.

The Pure-Play Alternative: First Majestic Silver

Most miners treat silver as an afterthought, a byproduct extracted while pursuing gold, copper, or zinc. First Majestic Silver (NYSE: AG) breaks that mold entirely. This $7.8 billion Vancouver-headquartered producer derives 57% of its revenue directly from silver — by far the industry’s highest concentration among peers.

The numbers tell a compelling story. In Q3, First Majestic produced a record 3.9 million ounces, representing a 96% year-over-year surge. Of its $139 million revenue increase that quarter, $73 million flowed from higher silver volumes while $66 million came from price appreciation. Translation: the company’s earnings now benefit from both supply expansion and market fundamentals.

With all-in sustaining costs between $14.80 and $15.80 per ounce, First Majestic maintains profitability across a wide silver price range — a substantial safety margin in the current environment.

Valuation Questions and Long-Term Positioning

The company’s 113 P/E ratio raises immediate eyebrows. But context matters: a business expanding revenue 96% year-over-year is precisely the type that can outgrow seemingly lofty multiples. First Majestic isn’t a mature cash-cow — it’s aggressively scaling production into a structural supply deficit that shows no signs of resolving this decade.

The forces powering silver demand — electrification, renewable energy, semiconductor advancement — operate on decade-long timelines. They’re not reverting next year or the year after. As long as supply remains bottlenecked and industrial consumption stays elevated, Buffett’s original thesis continues validating itself.

For investors betting on silver’s persistence as a bull market rather than a speculative episode, First Majestic represents the purest way to capture both production growth and commodity upside simultaneously.