Hidden Inflation Risks Amid AI Boom

As the global stock market rally driven by the 2025 artificial intelligence (AI) frenzy continues, investors are identifying AI investment itself as a potential inflation trigger as the biggest market threat for 2026. Concerns are growing that massive spending by Big Tech companies like Microsoft, Meta, and Alphabet could drive up electricity and semiconductor prices, potentially forcing central banks to halt rate cuts or resume tightening.

Global markets surged in 2025, buoyed by AI expectations and prospects of accommodative monetary policy. In the United States, seven major technology companies accounted for half of total market returns, and bond markets posted their best performance in five years amid slowing inflation. However, U.S. consumer price inflation remains above the Federal Reserve's 2% target.

Cost Surge from Data Center Construction Boom

The data center construction race among hyperscale companies is identified as a key driver of inflationary pressure. Morgan Stanley strategist Andrew Sheets noted, "In our forecast, costs are not declining but rising," citing both semiconductor price inflation and electricity cost inflation. He projected that U.S. consumer inflation would exceed the Fed's target through the end of 2027 due to these factors.

Fabio Bassi, Head of Cross-Asset Strategy at J.P. Morgan, analyzed that "inflation will remain elevated regardless of semiconductor prices due to improving U.S. labor markets, fiscal stimulus, and premature rate cuts."

Warning Signals from Big Tech Earnings

The market is already showing signs of concern. Oracle's stock plunged after disclosing sharp spending increases last month, and Broadcom's shares fell following margin pressure warnings. HP indicated that rising memory chip costs linked to data center demand would burden pricing and profitability.

Turning Point in AI Investment Cycle Since 2022

The AI investment boom that began with ChatGPT's emergence in late 2022 led to companies' full-scale infrastructure investments in 2023, expanding to competitive data center construction by hyperscalers in 2024-2025. This process drove sharp stock price increases for semiconductor companies including NVIDIA and surging investments in power infrastructure.

However, as of 2026, this investment frenzy is entering a new phase as it pressures real economy supply chains. Trevor Greetham, Head of Multi-Asset at Royal London Asset Management, stated, "The pin that will burst the bubble is probably tight monetary policy," noting it wouldn't be surprising if global inflation surged by the end of 2026.

Aviva Investors identified the risk of central banks ending rate cut cycles or resuming increases as AI investment and government spending add to price pressures as a key market risk in its 2026 outlook report.

[AI Analysis] Impact of Monetary Policy Shift on AI Valuations

Julius Bendikas, Head of European Economics and Dynamic Asset Allocation at Mercer, which directly manages $683 billion and advises on $16.2 trillion, stated that "the resurgence of inflation risk keeps me up at night." While not yet betting on stock market corrections, he revealed that Mercer is reducing exposure to bond markets vulnerable to inflation shocks.

Tightening monetary policy could dampen investor sentiment toward speculative technology stocks, increase funding costs for AI projects, and pressure profitability. AI-related technology stocks currently facing overvaluation concerns are particularly sensitive to rising interest rates.

Investors expect additional fiscal stimulus in the U.S., Europe, and Japan in 2026, along with continued AI investment, to support global growth. However, they are simultaneously watching for the possibility that these factors could reignite inflation and trigger central bank policy reversals. A structure is forming where inflationary pressure created by the AI investment boom itself paradoxically threatens the valuations of AI companies.