Goldman Sachs warns that artificial intelligence is driving a significant inflation wave, with the US facing the sharpest impact at an estimated 50 basis points of core PCE inflation by year-end—five times higher than other developed nations.
The surge stems from three sources: soaring memory chip prices (which have tripled year-over-year), rising software costs as firms add AI capabilities, and mounting electricity demand for data centers.
While long-term productivity gains from AI may eventually reduce inflation, the immediate spike is expected to peak in the US before the end of 2026.
What happened
Goldman Sachs research shows the US faces outsized inflationary pressure from AI demand. Core PCE inflation is being lifted by around 20 basis points annually now, expected to rise to 50 basis points by year-end. Other developed nations (Canada, Australia, Europe, UK, Japan) face an average 10 basis point increase—five times lower than the US.
Why it matters
Three distinct inflationary waves are driving the surge: memory chip prices have tripled year-over-year (an 8 GB DDR5 module rose to around $148 from $35), software prices are climbing as companies bundle AI tools, and electricity costs are rising as data centers demand more power. Software and accessories account for roughly 1% of US inflation compared to less than half a percent elsewhere, making AI-driven inflation primarily a US problem.
What to watch
Goldman expects US software and accessories inflation to peak before end of 2026, with prices growing at 30% year-over-year in November. Data centers are projected to account for around 11% of US power demand by end of decade, up from 6% today. Forecasters say AI's productivity benefits will eventually lower inflation, though the timing and magnitude remain uncertain.
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The inflation story reflects a fundamental supply-demand imbalance in AI infrastructure. Memory chips, a critical component for AI hardware, face intense demand from companies building data centers and training systems. This shortage has translated directly to consumer prices: the average price of a single memory module has tripled in a year. Similarly, software makers like Microsoft are passing through the cost of integrating AI capabilities by raising subscription prices, and electricity costs are climbing as the power requirements of data centers intensify.
What makes this a distinctly American phenomenon, according to Goldman Sachs, is the composition of the US economy. Software and accessories represent roughly twice the share of core inflation in the US compared to other developed nations, meaning US consumers and businesses are more exposed to price increases in these AI-adjacent categories. Other countries may experience the electricity shock, but less of the software markup.
The bank frames this as a temporary wave—one that will eventually reverse when AI's productivity benefits mature and supply constraints ease. However, that reversal is not guaranteed to be as deflationary as earlier tech cycles like the internet boom of the 1990s, creating a real policy headwind for the Federal Reserve in the near term.
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