AI-driven chip demand pushes up prices for phones and other tech goods

Heavy corporate outlays on artificial intelligence are creating a ripple effect that is driving up consumer prices across the United States. The need for massive computing power is boosting demand for semiconductors, prompting manufacturers of phones, computers and other tech accessories to raise their prices. July's consumer price index revealed that information-technology commodities rose 1.4% from the previous month, far above the 0.2% increase in core goods.

Economists such as Eric Johnson and Stephen Juneau explain that businesses are now competing with consumers for the same chips, which pushes costs higher. In addition, subscriptions for advanced generative AI tools are averaging $20-$30 per month per user. The surge in data-center electricity consumption has also lifted utility rates, with electricity costs up 4.2% year-over-year. While analysts expect AI to eventually lower costs through efficiency gains, the near-term effect is higher inflation for everyday tech items.