- 30 June 2026
Fundamentals, not just optimism, now drive the EM investment case.
Is AI inflationary or deflationary? Northern Trust says it's both, just not at the same time
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- 30.06.26
Northern Trust's Peter Wilke argues the AI investment boom is colliding with constrained supply, pushing up costs across chips, power, construction and skilled labour. Annual AI infrastructure investment is estimated to have topped $650 billion in 2025, with forecasts above $800 billion for 2026.
Wilke says this creates a dilemma for the Federal Reserve, since the build-out touches several "sticky" categories at once, including equipment, electricity, construction and financial conditions, even as buoyant equity markets and IPO demand loosen conditions further. New Fed chair Kevin Warsh has signalled he wants more focus on underlying inflation measures rather than core PCE alone.
The note suggests AI could still prove disinflationary in the long run if it lifts productivity and compresses wages, but warns markets should brace for the inflationary cost of building it first.
