AI is driving up consumer prices. That won't stop anytime soon.

The rapid adoption of artificial intelligence technology in the United States is contributing to higher consumer prices, hampering efforts to rein in inflation, according to experts. One major driver is the massive demand for semiconductors, which power AI systems, leading to increased costs for electronics manufacturers. This, in turn, has caused manufacturers to raise prices on a range of tech products, from smartphones and computers to software and accessories.

Columbia Business School professor Eric Johnson notes that consumers are highly aware of price changes in their daily devices, making items like smartphones a key indicator of rising costs. This week's Consumer Price Index revealed that July's inflation rate was 3.4% annually, aligning with economists' forecasts. While core goods, excluding volatile food and energy prices, rose by 0.2% from the previous month, IT commodities, including basic hardware and software, saw a sharper increase of 1.4% in July.

BofA Securities economist Stephen Juneau attributes this to a massive AI-related buildout requiring inputs like chips that are also used in consumer goods, leading to competition between consumers and businesses for these limited resources. Higher demand for graphics processing units and computer storage is pushing up prices, which manufacturers are then passing on to shoppers.

Software costs are also on the rise as consumers subscribe to premium generative AI tools, spending an average of $20 to $30 monthly. AI is also impacting consumers indirectly, with data centers consuming large amounts of energy, straining the power grid and raising electricity bills. U.S. economists predict that business investment in AI will continue to fuel inflation in the near term, with Oxford Economics lead U.S. economist Bernard Yaros forecasting that tech-driven inflation will persist longer than other current factors contributing to rising consumer prices, including rising tariffs and energy costs due to the Iran conflict.

While AI may eventually lower prices by boosting productivity, consumers will likely have to endure current inflationary pressures for the time being.