🚨 Artificial intelligence may be triggering the third wave of inflation.

Even Tim Cook said that this surge in costs is something he hasn't seen in over 40 years in the industry.

Tariffs can be negotiated. Oil prices can reverse when supply catches up. But this wave doesn't work like that.

AI infrastructure spending isn't a price shock, it's a demand shock, and it's still in its early stages.

The five major hyperscalers will spend $741 billion this year, a 75% increase from last year, and most of that money hasn't even been deployed yet.

This means the price pressures happening now are just the beginning, not the peak.

The mechanism is simple: AI needs memory chips. So does everything else.

Phones, game consoles, cars, laptops all draw from the same limited chip supply, so when AI scales up its orders, it doesn't just raise costs for AI, it raises costs for almost every electronic product on the market.

This is playing out in real time today.

Apple and Microsoft announced price hikes for MacBooks, iPads, and Xbox consoles on the same day, citing the same memory chip shortage.

Nintendo and Sony did the same thing weeks ago.

This isn't an isolated company passing on costs; it's the entire hardware industry simultaneously repricing around the same input shortage.

The Fed's bet is that AI will eventually pay for itself through productivity gains, thereby pushing inflation down.

That bet may ultimately be right. But Credit Suisse says that payoff is still years away, while price increases are happening now.

This means the Fed is being asked to keep rates steady or higher for a multi-year period during which the thing that's supposed to ultimately fix inflation is actively making it worse at the same time.

For Wash, this is much harder to defend than the temporary tariffs and oil shocks the Fed has dealt with so far.