AI Boom Sparks Inflation Fears at the Federal Reserve

The Federal Reserve is concerned that the AI boom could lead to higher inflation. According to the June meeting minutes, strong demand for AI infrastructure will likely sustain upward pressure on prices for technology products and electricity.

This shift in focus from productivity gains to demand shock has not yet been priced into the market. AI was initially seen as a way to boost productivity and suppress inflation, but it may have the opposite effect in the short term.

The costs of AI are already visible, with Apple recently raising prices across several products due to soaring memory and storage costs partly caused by demand from AI data centers.