Key insights
- Goldman Sachs reports AI is currently contributing to inflation through higher electronics, software, and electricity costs. They estimate a 0.3% boost to core PCE and 0.1% to core CPI over the past year, with a similar impact expected next year. While AI is expected to be disinflationary long-term, these short-term inflationary pressures could negatively impact consumer spending and corporate earnings, posing a slight bearish signal for US equities.
Investing.com-- Artificial intelligence is beginning to push up U.S. consumer prices through higher electronics, software, and electricity costs, even before broader productivity gains from the technology start lowering inflation, Goldman Sachs said in a note.
Goldman Sachs analysts said the bank sees “three key channels” through which AI is currently boosting inflation.
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First, booming demand for AI infrastructure has increased prices for key electronics inputs such as digital memory and batteries, raising costs for computer accessories and likely pushing up smartphone and PC prices in the coming months.
Second, software firms have been lifting prices as they add AI features to products. Goldman cited examples, including Microsoft’s M365 subscription increases and price hikes by Adobe (NASDAQ:ADBE), Duolingo (NASDAQ:DUOL), and Intuit (NASDAQ:INTU) tied to AI-enabled tools.
Third, growing electricity demand from data centers is lifting power prices in some U.S. regions, with Goldman estimating that higher electricity prices could add 0.1 to 0.2 percentage points to headline personal consumption expenditures inflation over the next several years.
The bank estimated AI-related price pressures boosted annual core PCE inflation by about 0.3 percentage points over the past year and core CPI by about 0.1 percentage point. Goldman expects a similar impact over the next year.
Still, analysts said AI should eventually become disinflationary as productivity gains spread through the economy, lowering production costs and improving efficiency.