AI may be inflationary before it becomes productive (www.axios.com)

Economists are observing that while the long-term outlook for AI suggests it will boost productivity and potentially stabilize inflation, its immediate impact is modestly inflationary. Analysts note that companies are still navigating how to harness advanced AI technologies effectively, which has yet to lead to significant cost savings that could be passed on to consumers. Notably, David Kelly from JPMorgan highlights three inflationary drivers linked to AI: rising electricity costs from powering data centers, increased wages for construction workers building these centers, and soaring prices for memory chips due to heightened demand. This influx of AI-driven costs occurs against a backdrop of other inflationary pressures, such as ongoing geopolitical tensions. Experts emphasize that separating AI's economic effects from broader factors like war or potential recessions adds complexity to understanding its influence on inflation. Observers like Martha Gimbel caution against overconfidence in predicting AI's economic trajectory, highlighting that while historical technological advancements have sometimes resulted in decreased prices and increased productivity, the current climate and uncertainties could lead to various outcomes. As companies pour trillions into AI, the wait for its transformative effectiveness continues.