Inflation in the United States is showing signs of being influenced by a new factor: the rapid expansion of artificial intelligence (AI) infrastructure. While previous inflationary pressures from trade disputes and rising gas prices have eased, the build-out of AI technology is driving up costs across a broad range of products and services, according to economists and industry analysts.

This surge in inflationary pressure is linked to the substantial capital expenditures by major technology companies. Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle are collectively expected to invest approximately $741 billion this year in AI and related infrastructure, representing a nearly 75% increase from the previous year. Much of this investment is being funneled into physical assets such as data centers, advanced computing equipment, cooling systems, power supplies, and extensive cable networks.

Economist Stijn Van Nieuwerburgh of Columbia University estimates that the cumulative spending on the AI build-out could reach around $8 trillion by 2032, a figure nearly five times the entire market value of New York City’s real estate. The high demand for components essential to AI infrastructure—such as memory and storage chips—is driving up their prices. These components have broad applications beyond AI, including in consumer electronics like smartphones, gaming consoles, and automobiles. Major tech firms, including Nintendo, Microsoft, Sony, and Apple, have already raised prices on their devices, citing unprecedented increases in production costs over the last four decades.

While the AI-driven inflationary effects are currently being felt, some experts anticipate that AI could have a long-term disinflationary impact by boosting productivity and enabling businesses to meet demand without raising prices. Former Federal Reserve Governor Kevin Warsh, now chairman of the Fed, has pointed to historical technological revolutions that eventually lowered inflation as productivity gains took hold. However, economists estimate that these benefits may take several years to materialize despite the rapid pace of AI infrastructure development.

In the short term, survey data reinforces the expectation that AI will contribute to inflationary pressures. A recent National Association for Business Economics survey found that 81% of economists believe the AI build-out will add to inflation in the coming year. This is supported by recent Labor Department data showing a roughly 15% year-over-year increase in consumer prices for computer software and accessories, and a 27% rise in prices for wholesale electronic components and accessories.

The inflationary pressures from AI stand apart from past shocks, such as tariffs or rising fuel costs, which were more transient. Instead, the continued demand for materials, labor, and electricity related to AI infrastructure could sustain higher price levels for an extended period. Labor costs are on the rise as well, with wages for electrical and wiring installers growing by 6.5% in April compared to 3.6% for all private-sector workers. Additionally, data centers’ energy consumption is expected to drive significant increases in electricity demand, potentially pushing consumer power prices up by around 6% annually over the next two years.

Despite these trends, economists caution that the AI-related inflationary effects are unlikely to match the surges seen during the post-pandemic reopening. Consumer expenditures on affected items such as electronics and electricity constitute a relatively small portion of overall spending. Nonetheless, the persistent upward pressure on prices could keep inflation elevated and complicate efforts by the Federal Reserve to return inflation to its 2% target. Some analysts warn that continued inflationary signals may influence public expectations, making it harder for inflation to moderate in the near term.