London: Global investors are increasingly worried that the rapid expansion of artificial intelligence could push inflation higher in 2026, even as markets remain largely focused on growth and expected interest rate cuts.
According to investors and analysts, massive spending on artificial intelligence infrastructure is emerging as one of the most overlooked economic risks this year. While AI has helped drive strong stock market gains, especially in technology shares, the costs linked to its growth are starting to raise concern.
The buildout of large data centres, advanced computer chips and energy networks is requiring huge capital investment. These projects are driving up demand for electricity, construction materials and skilled labour, adding pressure to prices across the economy. Some investors say these cost pressures could keep inflation above central bank targets for longer than markets expect.
Many markets entered 2026 betting that central banks would continue cutting interest rates after inflation eased in 2025. However, analysts warn that if AI related spending keeps prices elevated, policymakers may be forced to slow down or even pause rate cuts. Such a move could hit highly valued technology stocks that have benefited from lower borrowing cost expectations.
Fund managers say inflation risks from AI are not yet fully priced into markets. Several are beginning to rotate towards value stocks, inflation protected assets and sectors such as energy and financials, which may perform better if price pressures persist.
Despite these concerns, investors remain broadly positive about the long term benefits of artificial intelligence, including productivity gains and economic growth. Still, many now believe the transition phase could be more inflationary than previously assumed.
As one investor noted, artificial intelligence is no longer just a technology story. Its scale is large enough to influence the wider economy, and in 2026, that influence may be felt most clearly through prices rather than profits.