Live Markets: AI is boosting US inflation, Goldman says

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04/05/2026 14:54

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AI IS BOOSTING US INFLATION, GOLDMAN SAYS

While artificial intelligence is expected to deliver substantial productivity gains and lower production costs in the coming years, it is currently boosting U.S. inflation, said Goldman Sachs.

Three main channels are driving this inflationary effect, analysts at Goldman noted.

First, robust demand for AI infrastructure has pushed up prices for key electronics inputs like digital memory and batteries. This has already increased prices for computer accessories and is likely to raise smartphone and computer prices further in the near future.

Second, software companies are bundling new AI features into their products and raising prices.

According to the analysts, recent price hikes from Microsoft MSFT.O, Adobe ADBE.O, Duolingo DUOL.O, Intuit INTU.O, and Apple AAPL.O have seen prices rise by as much as 30% to 50% for some products.

Third, the surge in data center construction to support AI is increasing electricity demand, which is pushing up power prices in several U.S. regions.

However, Goldman highlights that the AI boost to inflation is partly a measurement problem.

The software and accessories component receives about 30 times more weight in the PCE index than in the CPI, amplifying the impact.

Moreover, neither index quality-adjusts for new AI features, so improvements are recorded as pure price increases, it added.

Goldman estimates AI-related price pressures have boosted year-over-year core PCE and core CPI inflation by about 0.3 and 0.1 percentage points, respectively, over the last year, and it expects a similar boost over the next year.

Looking ahead, these inflationary pressures should prove temporary, the analysts wrote.

"Once AI-related productivity gains become more widespread, we expect higher productivity growth to prove disinflationary at first - in line with the typical experience in prior episodes of technological innovation - especially if quality adjustment evolves to capture new AI features," they said.

Risks remain, Goldman added, that AI-led productivity gains may prove less disinflationary than past episodes if efficiency gains flow quickly into higher profits or wages rather than lower prices, or if the Fed loosens policy early in anticipation of disinflation.

(Joel Jose)

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