AI Investment Boom Could Drive Global Inflation in 2026, Experts Warn

Global stock markets are starting 2026 on a high, fueled by AI enthusiasm and strong corporate earnings. In the U.S., seven major tech companies accounted for half of all market gains last year, driving indices to record highs. European and Asian markets have mirrored this optimism, bolstered by expectations of monetary easing and continued AI-led growth. Yet, investors are increasingly cautioning that a hidden threat—AI-driven inflation—could destabilize these markets sooner than expected.

Analysts highlight that the massive investment in AI infrastructure, including new data centers by tech giants like Microsoft, Meta, and Alphabet, is placing upward pressure on costs. Energy consumption, memory chip shortages, and rising operational expenses are all contributing factors. “The costs are going up, not down,” said Morgan Stanley strategist Andrew Sheets, forecasting that U.S. consumer price inflation could remain above the Federal Reserve’s 2% target well into 2027.

Central banks may respond by ending rate-cut cycles or even raising interest rates, potentially cooling investor enthusiasm for high-risk tech stocks. Trevor Greetham of Royal London Asset Management warns that tighter money could prick the AI investment bubble, raising funding costs and weighing on profits for major tech firms. This would create a feedback loop where rising costs and reduced investor appetite further suppress stock valuations.

Market reactions have already started to appear. Oracle and Broadcom recently reported rising spending pressures, causing their shares to drop, while HP anticipates inflationary challenges in memory chip costs later this year. Asset managers are increasingly turning to inflation-protected securities to shield portfolios from the potential shock. Kevin Thozet of Carmignac emphasized that while AI remains a key growth driver, inflation risk remains “very underappreciated” by many investors.

Deutsche Bank estimates that AI-related data center investments could reach $4 trillion by 2030, a scale that may exacerbate supply bottlenecks and push costs even higher. Experts like George Chen, formerly of Meta, warn that rising expenses for memory chips and energy will likely force investors to reconsider the high valuations placed on AI companies. With global growth expected to accelerate due to government stimulus and technology investment, AI-driven inflation could emerge as the defining economic challenge of 2026.

source: Reuters