The AI frenzy hides an inflation bomb, the most underestimated risk of 2026?

Although global stock markets continued to rise in early 2026, driven by the artificial intelligence boom, investors may be overlooking a significant threat that could disrupt this celebration: the resurgence of inflation triggered by the tech investment frenzy. This risk could not only force central banks to reverse monetary policy but also directly threaten the core logic supporting the current high valuations in the market.

Despite the U.S. stock market reaching historic highs in 2025 under the leadership of seven major tech giants, and inflation data showing a decline, market participants warn that with large-scale government stimulus plans and massive corporate capital expenditures in the AI sector, global price pressures may resurface in 2026.

According to Reuters, several asset management managers pointed out that the market currently widely expects interest rates to be further lowered, and this optimistic sentiment may not fully account for the risks of an inflation rebound.

Once inflation accelerates, central banks may be forced to end the rate-cutting cycle and even tighten monetary policy again, which would cut off the flow of cheap funds into the AI concept market. For tech stocks that rely on high expectations and low financing costs, a tightening monetary environment would pose a direct blow, not only raising financing costs but also compressing corporate profit margins and lowering stock price valuations.

Analysts from institutions such as Morgan Stanley and Aviva Investors noted that the AI frenzy itself is becoming an inflationary force. The demand for energy and advanced chips in data center construction is driving up costs, which could lead to inflation rates remaining above the Federal Reserve's 2% target for a longer period, a risk that is currently largely underestimated by market participants.

Tightening Monetary Policy May Become the "Needle to Burst the Bubble"

Regarding the market outlook for 2026, some seasoned investors believe that a shift in monetary policy will be a key variable. Trevor Greetham, multi-asset head at Royal London Asset Management, stated that market bubbles often require a "needle" to burst them, and this needle is likely to come from monetary tightening. He pointed out that while he still holds large tech stocks, he would not be surprised if global inflation surged significantly by the end of 2026.

Greetham warned that tightening funds will reduce investors' appetite for speculative tech assets while increasing the financing costs of AI projects, thereby cutting into the profits and stock prices of tech groups.

Kevin Thozet, a member of the Carmignac investment committee, also expressed similar concerns, believing that as the economic growth cycle accelerates, inflation risks remain severely underestimated. Thozet noted that inflation could begin to trigger panic among investors, and as the risk of interest rate hikes increases, the high price-to-earnings ratios granted to large AI stocks will decline. To this end, he has begun to increase his holdings in inflation-protected bonds.

Rising Costs of Chips and Energy

In addition to the macro impact of monetary policy, the direct cost pressures brought about by AI infrastructure construction cannot be ignored. Analysts pointed out that the trillion-dollar competition among "hyperscale companies" like Microsoft, Meta, and Alphabet in data center construction is a significant inflationary force These projects are consuming large amounts of energy and advanced chips, leading to rising prices instead of decreasing.

Morgan Stanley strategist Andrew Sheets stated that according to his forecasts, related expenditures will rise rather than fall due to inflation in chip and electricity costs. He expects that partly due to massive corporate investments in AI, the U.S. consumer price inflation rate (CPI) will remain above the Federal Reserve's 2% target until the end of 2027.

Additionally, analysts at Deutsche Bank expect that capital expenditures for AI data centers could reach as high as $4 trillion by 2030. The rapid rollout of such projects may lead to supply bottlenecks in chips and electricity, causing investment costs to spiral upward.

George Chen, a partner at consulting firm Asia Group and former executive at Meta, pointed out that inflation in storage chip costs will drive up prices for AI groups, reduce investor returns, and ultimately lead to a decrease in funds flowing into the industry.

Corporate profits are showing signs of pressure

In fact, the market has already shown some early signs of tension regarding rising costs and potential over-expenditure on AI. According to Reuters, Oracle's stock price plummeted last month due to the disclosure of a surge in expenditures, and the stock price of U.S. tech giant Broadcom also fell after it warned that high profit margins would be squeezed. Personal computer manufacturer HP Inc. expects that its prices and profits will face pressure in the second half of 2026 due to rising storage chip costs driven by surging demand for data centers.

Julius Bendikas, head of European economics and dynamic asset allocation at Mercer, stated, "What keeps us awake at night is that inflation risks have resurfaced." Although he has not bet on a stock market correction, he is gradually withdrawing from the bond market, which may be affected by inflation shocks.

Fabio Bassi, head of cross-asset strategy at JP Morgan, added that in addition to chip prices, improvements in the U.S. labor market, stimulus spending, and the interest rate cuts that have already occurred will support inflation remaining above target. Aviva Investors also emphasized in its 2026 outlook that the end of the central bank's rate-cutting cycle or even the beginning of rate hikes will be a major risk facing the market