Global stock markets, currently soaring on a wave of artificial intelligence (AI) optimism as 2026 begins, might be overlooking a significant danger. Financial analysts are raising alarms that the massive tech investment boom itself could become a primary driver of a new surge in inflation.
The AI-Fuelled Market Highs and Hidden Risks
The rally has been particularly spectacular in US markets, powered by the stellar performance of the 'Magnificent Seven' tech giants. This elite group—comprising Alphabet, Amazon, Apple, Tesla, Meta Platforms, Microsoft, and Nvidia—delivered double-digit gains in 2025, pushing major indexes to record highs. The euphoria stems from boundless excitement about the potential of AI technology.
However, beneath this surface of exuberance, a concerning trend is building. Analysts point to the multi-trillion-dollar race among hyperscalers like Microsoft, Meta, and Alphabet to construct new data centres. This frantic expansion is itself becoming an inflationary force. The projects are consuming energy and advanced semiconductor chips at an unprecedented rate, creating intense pressure on supply chains and costs.
"The costs are going up not down in our forecast, because there's inflation in chip costs and inflation in power costs," Morgan Stanley strategist Andrew Sheets told Reuters. Early jitters about rising expenses and potential overspending on AI have already begun to surface in market movements.
Trillion-Dollar Spending with No Guaranteed Returns
The scale of capital expenditure (capex) dedicated to AI is staggering. Analysts at Deutsche Bank have issued a stark warning, estimating that AI data-centre investment could balloon to $4 trillion by 2030. They caution that the rapid rollout of these facilities could trigger severe supply bottlenecks for chips and electricity, causing investment costs to spiral out of control.
To put this figure in perspective, Deutsche Bank notes that the hyperscalers' cumulative $4 trillion spend through this decade surpasses the U.S. government's iconic moon-landing program. It represents "10x [the] inflation-adjusted cost of Apollo programme with no guaranteed return."
The anxiety is widespread among asset managers. Julius Bendikas, European head of economics and dynamic asset allocation at Mercer, which manages and advises on trillions in assets, shared the concern: "What keeps us awake at night is that inflation risk has resurfaced."
The Looming Threat of Tighter Monetary Policy
The potential consequence of this AI-driven inflation is a shift in monetary policy that could deflate the market bubble. Trevor Greetham, head of multi-asset at Royal London Asset Management, outlined the risk clearly.
"You need a pin that pricks the bubble and it will probably come through tighter money," Greetham said. He added that while he continues to hold big tech stocks for now, he "would not be surprised to see inflation booming worldwide by the end of 2026."
In summary, the very engine of the current stock market rally—colossal AI infrastructure spending—is sowing the seeds for potential economic headwinds. As the race for AI supremacy accelerates, investors are being urged to watch not just for technological breakthroughs, but also for the rising costs of chips and power that could prompt central banks to act, threatening the sustainability of the market's record highs.
