The artificial intelligence revolution in America is beginning to have an ugly downside: less money in your wallet.
The new findings: In a note on Tuesday, Goldman Sachs strategist Manuel Abecasis warned that AI has raised costs for US households. “We expect artificial intelligence to deliver large productivity gains over the next several years, boosting the economy’s potential growth rate and putting downward pressure on production costs,” Abecasis wrote. “So far, however, AI is boosting US inflation.”
Abecasis outlined three ways AI is boosting inflation.
First, strong demand for AI infrastructure has raised the prices of some key electronic components, which, in turn, has increased the prices of computer accessories and will probably boost smartphone and computer prices in the coming months.
Second, the addition of new AI features to existing software has put some upward pressure on software prices over the past couple of years.
And third, higher electricity demand to power data centers is increasing electricity prices in some US regions.
Read more: What is inflation, and how does it affect you?
AI is boosting prices, warns Goldman Sachs. · Goldman Sachs
Abecasis estimated that AI-related price pressures have jacked up core Personal Consumption Expenditures and core Consumer Price Index inflation by about 0.3 and 0.1 percentage points, respectively, over the past year. He estimated that AI will boost prices by another 0.3 and 0.1 percentage points, respectively, over the next year.
“We expect it [AI] to continue boosting inflation over the next couple of years,” Abecasis wrote.
Some political pushback: Florida Gov. Ron DeSantis is preempting utility companies from shafting consumers in favor of big AI deals.
“So I asked our legislature, and they passed, and I’m going to sign it soon, a bill that basically blocks utility companies from raising rates on consumers if they do a deal with the data center,” DeSantis told Yahoo Finance at the Milken Institute conference on Monday. There has been a wave of investment into power-hungry data centers that fuel the AI boom.
DeSantis admitted that hyperscalers haven’t built major data centers in Florida because of its tropical climate. However, he was critical of the long-term impact of data centers.