Data Centers are Behind Increase in Inflation

Investment Analysis Clubs Macro Economic Trends and Risks
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Costs Fueling Third Inflation Wave

On Thursday Apple announced a 15-25% price hike on Mac computers and iPads, after CEO Tim Cook told the Wall Street Journal that the jump in costs was “unlike anything he had seen in any area in over 40 years.” An Apple spokesperson placed the blame on the “rapid expansion of AI data centers, which has created an extraordinary surge in demand for memory and storage,” causing component prices to surge.

Elon Musk agrees.

AI data centers require specific, sophisticated equipment to ensure cool, stable operation - as well as electric and fiber-optic cables and backup generators in order to keep them running 24-7. According to the report, Van Nieuwerburgh estimates that the AI buildout could cost somewhere in the range of $8 trillion over the next six years. As such, the demand for components shared throughout the economy (memory, for example), the effects are now trickling down to consumer electronics - like iPads. Other companies such as Nintendo, Microsoft and Sony have all raised prices on devices.

*According to Goldman, data centers will account for nearly half of US growth in power demand through 2030 - and see consumer electricity prices rising around 6% annually in 2026 and 2027. *

The Journal also notes that while tariffs and oil were one-time economic shocks, the AI shock to demand could persist for years.

“The electricians that I met most recently at a data center in Plano were making $260,000 a year,” “Dirty Jobs” host Mike Rowe told Fox Business’ Stuart Varney, pointing to Texas as ground zero for the surge.

the most consequential component of that meeting was the fact that all three of them had been poached three times in the prior 18 months,” Rowe added. “That’s what’s going on in certain parts of the country, in the electric game right now.”

more expensive: ‘probably pushing inflation up’

https://qz.com/data-center-construction-costs-rising-inflation-050526
A data center went from a $7 billion price tag to $16 billion. It’s no exception

Land, labor, transformers, and permitting are all getting more expensive at once, compounding the cost of financing AI infrastructure

Nothing to see here people. Move along.
Once AI is operational, inflation will seem a minor problem.
Hundreds of thousands of workers can be laid off. Perhaps even millions! Corporate profits will soar along with the stock market benefiting the wealthy elites. CEO compensation will soar also with increased stock options.
And don’t worry corporations will direct AI to solve the increased pollution caused by the data centers operation. After corporate profits are secured by the labor lay offs though.

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AI spending including data centers does drive up some costs. But attributing AI as a cause of inflation is quite a stretch. Id say rising oil prices is far more impactful.

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So far I haven’t noticed much change at the pump.

I have noticed my utility requested rate change that more than DOUBLES the customer fee and raise the KWH rate by 85%.
We have a data center under construction in the county though I don’t know and El Paso Electric does not indicate how much of the rate change, if any, can be attributed to the new data center. I just know my electric bill could potentially double.

The public hearing is September 21 to October 2.

Tim Cook blames a 20-25% product increase due to data center construction.

Gas turbine demand has double.

EPRI research shows average gas turbine prices increased from roughly $2,000/kW to $3,000/kW, a nearly 50% increase.

Utilities will have to build capacity. That cost will spread to ALL elecity users.

I imagine electrical components cost more. As does labor with $260k wage electricians.
Methinks there is a ripple effect within the US economy.

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“Tim Cook, who told The Wall Street Journal that the jump in costs was unlike anything he had seen ‘in any area in over 40 years,’” Musk wrote in a post on X (2), adding, “Biggest price jump in anything I’ve ever seen too.”

Musk also shared a Wall Street Journal article (3) titled “The Data-Center Boom Is Sparking a Third Wave of Inflation.” The article warned that America’s artificial intelligence buildout is pushing up prices on everything from smartphones to electricity.

One chart in the article showed consumer prices for computer software and accessories have surged about 15% from a year earlier.

Other major device makers, including Hewlett-Packard (NYSE:HPQ), Dell (NYSE:DELL) and Nintendo, have already raised prices. The Wall Street Journal reported that prices for memory and storage chips have quadrupled since last year as demand surged.

Cook’s flood may be hitting the tech supply chain. But the steady erosion of purchasing power has been hitting U.S. savers for decades.

Technology giants from Amazon to Google are racing to build the foundation of AI, buying and making millions of specialized AI computing chips and building data centers packed with liquid-cooling systems to keep computers from overheating.

TD Cowen expects the major hyperscalers to spend $745 billion this year, with another $1 billion-plus in 2027 and 2028.

*The components used to make the chips and build the infrastructure are in such high demand that they’re causing ripples across other sectors and affecting prices. Memory and storage chips that are in high demand for AI are also used in consumer electronics such as video games, cars, and smartphones. *

"The initial phase of AI infrastructure will be inflationary as demand exerts pressure on a fixed supply side of the economy before it grows the pie through higher productivity growth, which may well end up as a disinflation driver in years to come," said Oscar Muñoz, head of economics for TD Securities.

“higher productivity growth” I believe they mean the laying off of tens if not hundreds of thousands of workers.

Phase one of any technological revolution comes with an increase in inflation because, Daco noted, it’s highly capital-intensive. That initial investment wave leads to pressures on resources with a lot of demand chasing a limited supply.

“So long as we’re in phase one, which is the investment phase, we’re going to see these pressures,” Daco said in an interview. "Over the next one to two years, you’re going to see these inflationary pressures gradually pass through onto consumers and then abate, once we’ve reached the peak investment growth rates."

“It takes time for companies to adopt the technology, incorporate it into the existing processes, create new processes, have the right talent on hand. All of those ingredients are necessary to see, then the productivity,” Daco said.

Oh sure I have noticed that in the EV transitional phase in the auto industry. The 40-60k vehicle pricing is just temporary. LOL
Though I have noticed the Chinese EV vehicle industry has done the above.

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IIRC, ever since the 1930s. :slightly_frowning_face:

DB2

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The EIA recently published the US electricity data for April of this year. Included in this report are the electricity price averages, in cents per kilowatt-hour, for all of the states and regions.

Year-over-year, from April 2025 to April 2026, residential rates increased 8.3%. Overall prices, including the rates charged to industry and commercial businesses, increased 7.5% over the same time.

Below are the April ‘26 residential prices and percent change over the previous 12 months for some selected states. Prices are in cents per kilowatt-hour.

Column 1 Column 2 Column 3 Column 4
Price Percent Change
New York 29.08 13.3%
California 32.74 2.6%
Texas 16.08 6.9%
Virginia 16.39 13.5%
Florida 15.51 4.0%
Ohio 18.18 14.3%
Washington 14.15 14.0%
U.S. Average 18.04 8.3%

~ ~ ~ ~ ~ ~ ~

Overall electricity production, in gigawatt-hours, increased 2.3% over the 12 months from April 2025 through April 2026. This includes the estimated generation from small scale (rooftop) solar PV systems. Overall production is increasing, but prices are increasing at a faster rate.

_ Pete

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Trying to pinpoint a single cause in a complex system is a fool’s errand.

The Captain

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