AI demand is nudging up prices for chips, gadgets, and some software

In short: Spending linked to AI is pushing up prices for some tech components and devices, but the effect on overall inflation is still small.

What's going on

Prices connected to the AI boom are rising in a few specific places, according to a Financial Times analysis of recent US inflation data.

One area is “computer software and accessories” in the Consumer Price Index, a major inflation measure. The FT notes that this category has seen price increases, even though some investors have been expecting demand for older cloud software to weaken. The article suggests this could be because software makers are charging more for products that now include AI features, like Microsoft Office tools that add Copilot.

Another possible cause is more basic. Researchers at the US Federal Reserve argue that the “accessories” part may be doing a lot of the work, especially flash drives. Flash drives and other memory products are needed to store huge amounts of data for “AI training” (teaching an AI model by feeding it many examples, like drilling with practice questions).

The price pressure shows up in other data too. The FT points to a 5.6% rise in May for imported capital goods used for data centers, including chips and computing equipment. It also cites producer price data for electronics that rose 27% in May, reflecting higher costs for semiconductors and memory devices.

What to watch

Most people do not buy memory chips directly, but they do buy laptops, tablets, and game consoles. The FT notes that Apple recently raised some MacBook and iPad prices by about 20%, and Microsoft raised Xbox prices by $100. Electronics are only about 2% of household spending, but the bigger risk is that other companies see these moves as permission to raise prices too.

Source: Financial Times