Microsoft<\/a>, Meta and Alphabet to build new data centres was also an inflationary force, analysts said, because of the rate at which these projects are gobbling up energy and advanced chips.<\/p>\n“The costs are going \u200dup not down in our forecast, because there’s inflation in chip costs and inflation in power costs,” Morgan Stanley strategist Andrew Sheets said.<\/p>\n
He said U.S. consumer price inflation would stay above the Federal Reserve’s 2% target until the end of 2027 in part because of heavy corporate investment in AI.<\/p>\n
J.P. Morgan head of cross-asset strategy Fabio Bassi said that an improving U.S. labour market, stimulus spending and rate cuts that have already \u200bhappened would keep inflation above that target “regardless of the price of chips.”<\/p>\n
Aviva Investors said in its 2026 outlook that a key market risk would come from central banks ending their rate-cutting \u200ccycles or even starting to hike, as price pressures build up from AI investment and waves of government stimulus spending in Europe and Japan.<\/p>\n
CHIPS AND CHARGES<\/p>\n
“What keeps us awake at night is that inflation risk has resurfaced,” said Julius Bendikas European head of economics and dynamic asset allocation at Mercer, which manages $683 billion of assets directly and advises institutions running a combined $16.2 trillion.<\/p>\n
He is not yet betting on a stock market correction, but is edging out of debt markets that might get rattled by an inflation shock.<\/p>\n
Markets have already shown early signs of nerves about rising costs and potential AI over-spending.<\/p>\n
Oracle’s shares plunged last month as it revealed spending had soared, while U.S. tech stablemate Broadcom’s stock also dropped after it warned its high profit margins would get squeezed.<\/p>\n
Personal \u2060computer maker HP Inc expects to feel pressure on prices and profits in the later part of 2026 \u200bfrom the surge in memory chip costs driven by rising data centre demand.<\/p>\n
“Inflation is what could start to scare \u200binvestors and cause markets to show some cracks,” said asset manager Carmignac investment committee member and portfolio manager Kevin Thozet.<\/p>\n
With the economic growth cycle accelerating “inflation risk remains very underappreciated,” he said, prompting him to stock up on inflation-protected Treasuries. As rate hike risks increased, he said, the price-earnings valuations investors applied to \u200dlarge AI stocks would fall.<\/p>\n
ANALYSTS SEE AI COST \u2060BLOWOUT<\/p>\n
Deutsche Bank expects AI data-centre capital expenditure to reach as much as $4 trillion by 2030 and the rapid rollout of these projects could cause supply bottlenecks in chips and electricity that make investment costs spiral, the bank’s analysts said.<\/p>\n
George Chen, partner at consultancy Asia Group, who also formerly held a senior role at Meta, said that cost blowouts and consumer \u2060price inflation would raise the costs of AI projects and prompt a rethink among investors about chasing the AI theme.<\/p>\n
“Memory chip cost inflation will push up prices for AI groups, lower investors’ returns and then the flow of \u200cmoney into this sector will reduce,” he said.<\/p>\n
(Writing by Naomi Rovnick. Reporting by Naomi Rovnick in London, Brenda Goh in Shanghai and Lewis Krauskopf in New York. \u200cAdditional reporting by Karin Strohecker and Vidya Ranganathan in LondonEditing by Vidya Ranganathan and Jane Merriman)<\/p>\n","protected":false},"excerpt":{"rendered":"By Naomi Rovnick and Lewis Krauskopf LONDON\/NEW YORK, Jan 5 (Reuters) – Global stock markets, riding high on…\n","protected":false},"author":2,"featured_media":268078,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[261],"tags":[291,289,290,125832,18,182,19,137128,11427,17,137131,205,137130,137132,82,137129,38974],"class_list":{"0":"post-268077","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-consumer-price-inflation","12":"tag-eire","13":"tag-federal-reserve","14":"tag-ie","15":"tag-inflation-risk","16":"tag-investors","17":"tag-ireland","18":"tag-royal-london-asset-management","19":"tag-stock-markets","20":"tag-surge-in-inflation","21":"tag-tech-groups","22":"tag-technology","23":"tag-trevor-greetham","24":"tag-u-s-treasury"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/115841610737381592","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/268077","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=268077"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/268077\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/268078"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=268077"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=268077"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=268077"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}