AI Data Center Construction Boom Emerges as New Inflation Catalyst
Claire Weston
Five hyperscalers are set to spend a combined $741 billion in capex this year, up nearly 75% year-on-year, and the resulting resource grab is pushing up prices from chips to electricity — 81% of economists now expect the boom to worsen inflation within the next year.
Where is the $741 billion actually going?
Alphabet, Amazon, Meta, Microsoft, and Oracle are projected to spend a combined $741 billion in capital expenditure this year — up nearly 75% from last year.
Columbia University economist Stijn Van Nieuwerburgh estimates total AI-infrastructure spending through 2032 could reach roughly $8 trillion — about five times the assessed value of every property in New York City.
This means → this is not a one-off purchase cycle but a construction wave stretching close to a decade, on the scale of building a megacity.
Where are prices already climbing?
U.S. Bureau of Labor Statistics data: consumer computer software and accessories rose about 15% year-on-year in May; wholesale electronic components surged 27%.
Nintendo, Microsoft, and Sony have all raised device prices. Apple CEO Tim Cook told the Wall Street Journal that cost increases are at levels he has "never seen in 40-plus years."
In plain terms = memory chips, cables, and power that data centers are hoarding are the same resources phones, game consoles, and cars need — when one side grabs more, the other side pays more.
How is this different from a tariff shock?
EY-Parthenon chief economist Gregory Daco, who chairs NABE, noted: "The first phase of any major technology revolution puts pressure on finite resources, which pushes up prices."
A NABE survey found 81% of economists expect the AI building boom to intensify inflation over the next year.
This means → tariffs and oil-price spikes are one-time price pulses; AI infrastructure creates sustained demand pull — the pressure does not fade after a single hit.
Isn't AI supposed to cut costs? When does the "dis-inflation" arrive?
UBS economists argue that even if AI buildout moves faster than the railroad, electrification, or internet eras, AI's inflation-dampening effect will take years to materialize.
Fed Chair Kevin Warsh has previously written that "AI will be an important disinflationary force," but whether that call proves right will be the first major test of his leadership at the Fed.
In plain terms = the reality right now is that AI is pushing prices up first; as for when it flips and pushes them down, no one can put a date on it.
Content is for reference only, not financial advice.