AI-driven inflation is 2026's most overlooked risk, investors say

• AI data center capital expenditure is expected to reach up to $4 trillion by 2030, creating supply bottlenecks in chips and electricity that could cause investment costs to spiral
• Morgan Stanley forecasts U.S. consumer price inflation will stay above the Federal Reserve's 2% target until the end of 2027, partly due to heavy corporate AI investment
• Seven tech groups contributed half of all U.S. market earnings in 2025, making markets heavily exposed to any AI correction triggered by rising costs or central bank rate hikes

Summary: AI-Driven Inflation Risks in 2026

Key Concern: Investors warn that AI-driven inflation poses a major overlooked threat to global markets in 2026, potentially ending the current tech rally that propelled stocks to record highs in 2025.

Market Context: U.S. stock indexes achieved double-digit gains in 2025, with seven tech companies contributing half of all market earnings. However, inflation remains above the Federal Reserve's 2% target, raising concerns about the sustainability of the AI boom.

Inflation Drivers:

• Multi-trillion-dollar data center construction by hyperscalers (Microsoft, Meta, Alphabet)
• Rising chip costs and power expenses
• Government stimulus in the U.S., Europe, and Japan
• Improving labor markets and prior rate cuts

Financial Projections: Deutsche Bank estimates AI data-center capital expenditure could reach $4 trillion by 2030. Morgan Stanley predicts U.S. consumer price inflation will exceed 2% through end of 2027.

Market Implications:

• Central banks may halt rate cuts or implement hikes, ending easy money flow
• Higher funding costs for AI projects would reduce tech profits
• Price-earnings valuations for large AI stocks likely to fall
• Oracle and Dell already showing pressure from rising memory chip costs

Expert Views: Trevor Greetham (Royal London Asset Management) expects potential inflation boom by late 2026. Mercer's Julius Bendikas ($683 billion AUM) is shifting away from debt markets vulnerable to inflation shocks. Kevin Thozet (Carmignac) is investing in inflation-protected Treasuries, noting inflation risk is "very underappreciated."

Supply Concerns: Rapid AI infrastructure rollout may cause bottlenecks in chips and electricity, spiraling investment costs further.