Major institutional investors are warning that AI-driven inflation is the most overlooked market risk for 2026. While AI is often viewed as a deflationary force, strategists from Royal London Asset Management and J.P. Morgan argue that massive infrastructure spending is actually pushing prices higher. Other investors and strategists, such as Aviva Investors and Morgan Stanley have also sounded the alarm.
The primary driver is the “trillion-dollar race” for data centers, which has tripled annual capital expenditure to over $500 billion. This surge is creating intense competition for energy, specialized labor, and raw materials like copper.
Investors fear that if this spending keeps inflation above 3%, central banks will halt interest rate cuts, potentially “pricking the bubble” for high-flying tech stocks.
