LONDON/NEW YORK, Jan 5 (GeokHub) — Global equity markets surging on artificial intelligence optimism at the start of 2026 may be overlooking a growing threat that could derail the rally: inflation reignited by massive tech investment, investors and analysts warn.
U.S. stock indexes closed 2025 at record highs after double-digit gains, driven largely by enthusiasm for AI and expectations of monetary easing. A handful of major technology firms accounted for roughly half of all market earnings, while European and Asian equities also climbed to historic peaks.
Bond markets rallied alongside stocks as inflation cooled last year, delivering U.S. Treasuries their strongest annual performance in five years. But inflation remains above the U.S. Federal Reserve’s long-term 2% target, and investors say the conditions that kept prices in check may not last.
Looking ahead to 2026, waves of government stimulus in the United States, Europe and Japan — combined with the capital-intensive AI boom — are expected to turbocharge growth but also reignite price pressures, forcing central banks to halt or reverse interest-rate cuts.
“You need a pin to prick the bubble, and it will probably come through tighter money,” said Trevor Greetham, head of multi-asset at Royal London Asset Management. While still holding large technology stocks, he said he would not be surprised to see global inflation accelerating again by late 2026.
Higher rates would cool enthusiasm for speculative technology stocks, raise financing costs for AI projects and compress profit margins across the sector, Greetham said.
Data Centres, Chips and Power Costs Drive Inflation Risk
At the centre of those concerns is the multi-trillion-dollar race by technology giants to build AI data centres. Analysts say the scale of investment by companies such as Microsoft, Meta and Alphabet is straining supplies of advanced chips, electricity and infrastructure, pushing costs higher across the economy.
“The costs are going up, not down,” said Andrew Sheets, a strategist at Morgan Stanley, citing rising chip prices and escalating power costs. He expects U.S. consumer inflation to remain above the Fed’s target until at least the end of 2027, partly because of sustained corporate spending on AI.
J.P. Morgan’s head of cross-asset strategy Fabio Bassi said an improving labour market, fiscal stimulus and earlier rate cuts would keep inflation elevated regardless of chip prices.
Investment firm Aviva Investors warned in its 2026 outlook that markets were vulnerable to central banks ending rate-cutting cycles — or even resuming hikes — as inflation pressures build from AI investment and government spending.
“What keeps us awake at night is that inflation risk has resurfaced,” said Julius Bendikas, European head of economics at Mercer, which manages or advises on more than $16 trillion in assets.
Early Warning Signs in Tech Shares
Markets have already shown signs of strain. Oracle shares fell sharply last month after revealing a surge in spending, while Broadcom warned that rising costs could squeeze its margins. HP Inc said it expects pressure on prices and profits later in 2026 as memory chip costs climb due to data-centre demand.
“Inflation is what could start to scare investors and cause cracks to appear,” said Kevin Thozet, portfolio manager at Carmignac, adding that he has increased holdings in inflation-protected U.S. Treasuries.
Deutsche Bank estimates AI data-centre capital spending could reach $4 trillion by 2030, warning that rapid expansion risks supply bottlenecks that would drive costs even higher.
Rising chip prices, electricity demand and funding costs could ultimately slow investment flows into AI, analysts said — turning what has been the market’s biggest growth driver into its most underestimated risk.
