Goldman Sachs has issued a stark warning that the United States is likely to suffer the most from a worldwide inflation wave fueled by artificial intelligence (AI). According to their recent research, the surge in AI demand is leading to higher consumer prices globally, primarily due to supply constraints affecting critical components such as memory chips and semiconductors.

Megan Peters, an economist at Goldman Sachs, noted that AI is expected to elevate core personal consumption expenditures (PCE) inflation—an important measure for the Federal Reserve—by approximately 20 basis points annually in the US. By the end of this year, this inflationary pressure is projected to more than double, with an increase of 50 basis points anticipated.

In comparison, other developed nations such as Canada, Australia, Europe, the UK, and Japan are expected to see a much smaller average increase of around 10 basis points. Peters emphasized that while the inflationary effects are not entirely negligible, they are significantly less impactful outside the US, suggesting that AI-driven inflation is predominantly an American issue.

Three Waves of Inflation

Peters further dissected the inflationary impact of AI into three distinct waves affecting the economy:

• Memory Prices: The demand for AI hardware has caused memory chip prices to soar. For instance, the average price of an 8 GB DDR5 memory module has surged to about $148, over three times the $35 average from the same week last year. Goldman Sachs anticipates that inflation related to software and accessories in the US will peak before the end of 2026, with prices increasing at a 30% year-over-year rate in November.
• Software Prices: As companies bundle software with AI tools, software prices are also on the rise. For example, Microsoft has raised the price of its flagship 365 bundle following the integration of its AI Copilot tool. This increase in software costs contributes more significantly to core inflation in the US compared to other developed nations.
• Electricity Prices: The energy sector is another critical area affected by AI, given the substantial electricity requirements for data centers. The average price for one kilowatt-hour of electricity in US cities has risen to $0.19, reflecting a 27% increase since May 2022. Goldman Sachs estimates that data centers will account for approximately 11% of the US's total power demand by the decade's end, up from 6% today.

The rising energy prices are further exacerbated by supply fears linked to geopolitical tensions, including the ongoing conflict in Iran. As the demand for AI technology continues to grow, the economic implications may pose significant challenges for the US economy in the near future.