Money managers are identifying artificial intelligence infrastructure spending as the primary overlooked factor pushing inflation higher in 2026 as massive investments in data centers, chips, and energy fuel demand that outpaces supply. The warning comes as global markets enter the new year riding high on AI optimism but inflation lingers above the Federal Reserve's 2 percent target.
Asset managers like Trevor Greetham at Royal London Asset Management expect worldwide inflation to boom by late 2026. Greetham holds big tech positions but anticipates tighter monetary policy as the bubble-pricking mechanism. For 2026, waves of government stimulus in the United States, Europe, and Japan alongside the AI boom are expected to refuel global growth.
This has money managers bracing for inflation to re-accelerate, prompting central banks to end their rate-cutting cycles and slamming the brakes on easy money flow into AI-obsessed markets. Expectations for further rate cuts have buoyed bonds, handing United States Treasury investors the best annual performance for five years as inflation retreated in 2025.
Markets have already shown early signs of nerves about rising costs and potential AI overspending. Oracle's shares plunged last month as it revealed spending had soared while United States tech company Broadcom's stock also dropped after it warned its high profit margins would get squeezed.
Personal computer maker HP expects to feel pressure on prices and profits in the later part of 2026 from the surge in memory chip costs driven by rising data center demand. Inflation is what could start to scare investors and cause markets to show some cracks according to Carmignac investment committee member Kevin Thozet.
With the economic growth cycle accelerating, inflation risk remains very underappreciated, prompting Thozet to stock up on inflation-protected Treasuries. As rate hike risks increase, the price-earnings valuations investors apply to large AI stocks would fall.
Deutsche Bank estimates that AI data center capital expenditure could reach as much as 4 trillion dollars by 2030, warning that rapid expansion risks creating bottlenecks in chips and electricity that could send costs spiraling. What keeps us awake at night is that inflation risk has resurfaced according to Julius Bendikas, European head of economics and dynamic asset allocation at Mercer.
Mercer manages 683 billion dollars directly and advises on 16.2 trillion dollars in assets. While Bendikas is not yet predicting a stock market correction, he is reducing exposure to debt markets that could be hit hardest by an inflation shock.
George Chen, partner at consultancy Asia Group and a former senior Meta executive, said rising costs could eventually cool enthusiasm for AI investments. Memory chip cost inflation will push up prices for AI groups, lower investors' returns, and then the flow of money into this sector will reduce.
Aviva Investors highlights risks of central banks halting or reversing rate cuts due to AI-driven costs. Electricity demand from data centers surges alongside memory chip shortages affecting companies across the technology sector. Conservative investors are preparing for volatility by diversifying beyond tech hype into energy, commodities, and real assets.
The Federal Reserve faces challenges maintaining cuts amid persistent pressures. United States consumer prices likely remain above 2 percent through 2027, partly from AI capital expenditure. This dynamic threatens AI-fueled market gains as higher rates could squeeze valuations reliant on cheap money.
