The shockingly unpopular drive to pepper the United States with massive AI data centers isn’t just driving up electricity prices, wasting huge amounts of water, and reviving heavy-polluter power stations — it’s also making life more expensive for the average American.
As the Wall Street Journal reports, the data center boom is driving a “third wave of inflation” which — following president Donald Trump’s unprovoked tariff war and the conflict in Iran choking out oil supplies — is increasing consumer prices even more.
We’ve already seen a massive run on semiconductors cause PC components, like RAM and storage devices, to become incredibly unaffordable. Just this week, Apple was forced to raise prices by hundreds of dollars for the vast majority of its offerings, once again highlighting surging costs amidst AI-driven chip shortages. According to the Labor Department, prices for wholesale electronic components and accessories were up a stunning 27 percent last month compared to a year ago.
Now, analysts are trying to get a better sense of how these effects could ripple across other markets, as well as how long this inflationary period will last. The results could have major implications for an economy that’s increasingly being held up by a handful of AI-crazed tech companies.
Proponents of AI continue to argue that the tech is powerful enough to increase productivity enough to push down inflation. Put simply, the idea is that businesses will have an easier time meeting demand without raising prices.
At least, that’s the theory — but it’s not what’s playing out right now. Economists at UBS warn that the current frenzy to construct new data centers is only the very beginning. Productivity gains and dis-inflationary pressure could take years to materialize, if ever.
In other words, consumers will have to bear the brunt of the tech industry’s latest obsession for the time being, a sobering predicament.
Worse yet, unlike tariffs and the war in Iran, AI is a “shock to demand that could persist for years,” per the WSJ. Companies have earmarked hundreds of billions of dollars in expenses, and construction of data centers has only begun, despite the trend turning into a major political liability.
More on AI and inflation: Americans Increasingly Alarmed About Tech Industry’s Looming AI Bubble