Artificial intelligence was supposed to reduce prices. Instead AI is boosting inflation.

MW Artificial intelligence was supposed to reduce prices. Instead AI is boosting inflation.

By Jeffry Bartash

Soaring AI demand reverses long trend of declining prices for technology

The public backlash against artificial intelligence is growing.

The surge in U.S. inflation, reaching a three-year high, has been fueled by rising oil prices and the lingering effects of the Trump tariffs. But another, more surprising thing, is adding to the problem.

The boom in artificial intelligence.

The business world's gold rush to build out AI has resulted in unprecedented demand for computer chips, memory and other electrical parts. Prices of these and related equipment are surging and contributing to increases in inflation.

The effects of AI on overall U.S. inflation are very small for now and hard to accurately calculate, analysts say, but the impact is becoming more visible.

One illustration is the cost of a category called "computer software and accessories" in the consumer-price index. These prices have almost always been in steady decline since the government began keeping track in the late 1990s.

And now? Prices have soared in 2026, pushing the increase over the last 12 months to almost 14% - a record high.

Price increases for all the stuff needed to flesh out AI technology are unlikely to deflate anytime soon.

A measure of wholesale prices for electronic components, for example, has jumped a record 28% in the 12 months ended in April.

Just one year ago, the cost of these electronic parts was declining.

Since many of these AI-related components are produced overseas, American businesses are ramping up imports.

Imports of computers more than doubled in the first three months of 2026 to $93 billion compared with the first quarter of 2025, for instance.

The first-quarter trend suggests imports of computers could set a record this year, following a massive and record surge in 2025.

That's not all. Imports of semiconductors have shot up 40% and computer accessories 37%, also comparing the first three months of 2026 and the same period in 2025.

The AI revolution shows no signs of slowing.

The kingpin of AI computer chips, Nvidia (NVDA), is expected to deliver another blockbuster profit report for the first quarter after the U.S. stock market DJIA SPX closes.

Extreme demand suggests prices won't ease anytime soon, adding another worry for the Federal Reserve as it struggles to reduce stubborn inflation.

"We think the bigger risks to inflation come from the AI boom," wrote analysts at Oxford Economics.

How so? The insatiable appetite for high-tech products could eventually bleed into popular goods such as cellphones, laptops and the like - the stuff consumers buy.

What's more, most of the costs tied to the AI boom have been absorbed by businesses so far. That won't go on forever, economists say.

The irony is that AI has widely been viewed as a major corrective to high inflation. The technology is supposed to make workers and companies more efficient, thus lowering the cost of business and potentially leading to lower prices.

That may still happen in the longer run, but it sure isn't happening now.

"If AI technology ultimately lowers the cost of production the result will be deflationary," Citibank economists wrote in research note. "But currently the AI infrastructure build-out is delivering an inflationary impulse to the economy."

-Jeffry Bartash

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May 20, 2026 13:51 ET (17:51 GMT)

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