A scene unseen in the past 40 years! Surging data center and memory costs are driving the third wave of inflation.

A scene unseen in the past 40 years! Surging data center and memory costs are driving the third wave of inflation.

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The boom in artificial intelligence infrastructure construction is becoming a new driver of inflation. Its impact has spread from chips to consumer electronics, electricity, and even the labor market, causing some economists to worry that this AI-driven price pressure will persist for years.

Apple announced this week that it will raise prices for Mac computers and iPads by 15% to 25%. CEO Tim Cook told The Wall Street Journal that this jump in costs is "something he has never seen in his more than 40 years in the industry." Elon Musk strongly agrees with this sentiment.

The blame points directly to the rapid expansion of AI data centers—which has caused "unprecedented surges in demand" for memory and storage components, leading to significant price increases for parts. Nintendo, Microsoft, and Sony have also raised prices for their devices.

Meanwhile, U.S. Department of Labor data shows that in May this year, consumer prices for computer software and accessories rose about 15% year-on-year, while wholesale prices for electronic components and accessories soared 27% year-on-year. Goldman Sachs forecasts that consumer electricity prices will rise at an annual rate of about 6% in 2026 and 2027. The impact of the AI construction boom on inflation is appearing simultaneously in multiple dimensions.

AI Arms Race: Unprecedented Scale

The scale of AI infrastructure investment is reshaping the resource allocation landscape of the entire economy.

According to FactSet data, analysts expect the capital expenditures of the five major "hyperscale" cloud computing companies—Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle—to total $741 billion this year, nearly a 75% increase over last year. Columbia University economist Stijn Van Nieuwerburgh estimates that the total investment in AI infrastructure construction over the next six years could reach as high as $8 trillion.

These funds are flowing into highly specific and physical usages. AI data centers require precise, specialized equipment to maintain stable low temperatures, as well as power cables, fiber optic cables, and backup generators to ensure uninterrupted, round-the-clock operation. This concentrated demand for certain components is permeating the entire economy through the supply chain.

Price Pressures Transmitted to the Consumer Side

The impact of the AI construction boom on prices is no longer confined to the technology sector.

Memory is a core component shared by data centers and consumer electronics, and its sharply expanding demand is driving up the cost of all downstream products. Apple's price increase is a typical case—the memory and storage chips used by iPads are in direct competition with similar products used in data center servers.

The trend in electricity prices is also worth attention. Electricity prices soared rapidly during the COVID-19 pandemic and have accelerated even more lately. Goldman Sachs expects data centers to account for nearly half of new electricity demand in the U.S. before 2030, and predicts that consumer electricity prices will rise at an annual rate of about 6% in 2026 and 2027.

The labor market is also feeling the pressure. Data center construction has stimulated strong demand for electrical and wiring installation contractors, whose average hourly wages in April increased 6.5% year-on-year, far higher than the 3.6% increase for all private sector employees.

Key Differences from Previous Inflation Shocks

This round of AI-driven price pressure is fundamentally different from tariff shocks or oil price fluctuations.

Tariffs and oil prices are one-off economic shocks, while AI's impact on demand could last for years. This judgment has already been reflected in capital markets—the Philadelphia Semiconductor Index has risen about 150% over the past year; even with a sharp pullback this week, the gains remain substantial, reflecting investors’ expectations for persistently high chip demand.

A survey released Monday by the National Association for Business Economics (NABE) showed that 81% of respondents believe AI infrastructure construction will drive up inflation in the coming year. EY-Parthenon chief economist and NABE president Gregory Daco said, "In the first phase of any major technological revolution, limited resources tend to come under pressure, which usually pushes prices upward."

Deflationary Dawn: May Take Years

Despite clear short-term inflation pressure, some economists remain optimistic about AI's long-term effects.

Current Fed Chairman Kevin Warsh wrote in The Wall Street Journal last November, noting that "AI will become an important deflationary force, increasing productivity and enhancing America’s competitiveness," and believes that "improving productivity should lead to significant growth in real wages—a one percentage point increase in annual productivity growth can double the standard of living over a generation."

However, UBS economists believe that there is at least a several-year gap between today's construction frenzy and the point when AI truly starts to lower prices. In other words, for investors and consumers, the deflationary benefits brought by AI are still far away, while the current price pressures have already arrived.

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