The FED Just EXPOSED AI As The CAUSE Of INFLATION...

The Federal Reserve just did something it has never done before—it officially identified artificial intelligence as a source of inflation.

While new Fed Chair Kevin Warsh argues AI will eventually lower prices through higher productivity, the Fed's own meeting minutes reveal a very different reality: AI infrastructure spending is already pushing up the cost of semiconductors, electricity, and consumer goods.

In this episode of Wall Street Truthbombs, Mark Malek breaks down the hidden battle inside the Federal Reserve, why AI may actually be making inflation worse today, what exploding chip prices mean for your wallet, and why the next Fed meeting could become one of the most important of the year.

If AI is supposed to make life cheaper... why are your bills going up?

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Transcript

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Federal Reserve just did something it has never done before. It named artificial intelligence in its own official record as a reason your prices are going up. By the end of this video, you're going to understand exactly why the AI boom is inflating your bills right now, why the brand new Fed chair is betting the opposite, and what that fight means for your money before the end of this month. This is not about NVIDIA earnings, guys. This is about the one line buried in the Fed minutes that should have been the headline. Let me start with the story. Everyone on Wall Street is selling you right now. The story goes like this artificial intelligence is a miracle machine. It makes workers faster, it makes companies leaner, and over time it drives the cost of everything down. In that story, AI is the cure for inflation, not the cause. The man at the top, though, believes this deeply. Kevin Walsh, the new Fed chair, came into the job a true believer. Before he was confirmed, he wrote that AI will be a significant disinflationary force. He's called the AI boom the most productivity-enhancing wave of our lifetimes. He called it structurally disinflationary. And his playbook, it's not new. It is the Alan Greenspan playbook from the 1990s. Back then, the Fed let the economy run hot during the internet boom, betting that technology had raised the economy's speed limit. For a while, Greenspan was right. Warsh wants to make that exact same bet on AI. And on paper, it is a pretty seductive bet. And look, I want this bet to pay off as much as anyone does, but this is Wall Street. And my friends, you know on Wall Street, there's no free lunch. Every miracle has a price tag, and somebody always pays it first. The question is never whether AI changed the economy. The question is who pays for the build out and when? Well, right now, the answer to when is today. And the answer to who is you and me. And to be fair to Warsh, he's not blind to the risk. Speaking in Portugal last week, he said the AI shock is leading to a boom in spending, that he sees it first in demand, and that he's confident supply will ultimately catch up at some point. So we're spending most of our time, he said, trying to monitor those developments. Monitor, not celebrate, not act on, just monitor. That is a Fed chair who believes the thesis, but it's too wise to bet the whole inflation fight on it. And here is just one problem with Warsha's story. The Fed's own record just contradicted him, and it did it in writing. My friends, before we get deeper, if you like this type of content, please click like and don't forget to subscribe. It's important to be in the know. And we want you to do it with us every single day. Okay. Every few weeks, the Fed releases the minutes from its last meeting. Think of it as the closest thing we get to being a fly in the wall inside that venerable room. And buried in the latest set in the participants' discussion section was this line. Strong demand for AI infrastructure would likely sustain upward pressure on prices for technology products and electricity. Let that sink in. That is not a discussion about AI stocks. That is the Federal Reserve identifying the AI buildout as a source of inflation in its own official record. And the staff went even further. They blame part of the rise in core goods inflation, the stuff that strips out food and energy, on what they called AI-related price pressures, right alongside tariffs. That is not a footnote. That is a structural admission. And the mechanism, it's not complicated. When you pour trillions of dollars into building data centers at a pace the world has never ever seen, you need semiconductors by the shipload and electricity by the gigawatt. All that demand slams into supply chains that were never even built for it. The market has a name for what happens next. Well, we call it chipflation. And here's the receipt the headlines skipped. Apple just raised prices on its Macs and iPads, its first formal move to pass higher chip costs on to you and me. Why? Because memory prices are literally exploding. DRAM prices jumped 98% in a single quarter with another 58 to 63% increase projected for this one. Apple said it has never seen a component price rise this much, this fast. The stock had its worst day in over a year when they announced that. Chips are in everything. So when chip prices climb, well, prices climb everywhere downstream. Your laptop, your tablet, your electric bill. And chips are only half of it. The Fed didn't say that, the Fed didn't just say tech products, it said electricity, because those data centers are the hungriest machines ever built. They don't sip power, they swallow it by the gigawatt. The power to train an AI model and the power to run your air conditioner come from the same grid. And one side bids up the other price, the other side pays it. That's you at the end of the month on a bill that you never thought had anything to do with Silicon Valley. Now, let me ask you something. If the Fed chair believes AI lowers prices, but the Fed's own minutes say AI is right is raising them. Who do you believe? Because his own committee isn't sure either. Most participants said growth driven by AI investment could contribute to more persistent inflationary pressures. A few went all the way, saying there was actually a case to raise rates right now. They stood down this time, but they put it on the record. So where does that leave you? Well, some members did echo Warsh saying productivity gains from AI would eventually reduce costs and push inflation down. And there is the word doing all the work. Okay. Eventually, eventually, eventually is not a monetary policy tool, my friends. Your mortgage rate doesn't come down on eventually. Your credit card interest does not reset on eventually. And as far as the bond market is concerned, well, eventually might as well be never. And the data is not cooperating with the optimists, unfortunately. Headline PCE inflation, the Fed's favorite gauge, came in at 4.1% for the year ending in May. That's the highest since 2023. Core PCE hit 3.4%. That's the highest since October 23. The Fed's own staff revised their inflation forecast higher, explicitly blaming the AI buildout as one of the reasons. They didn't revise it lower. They're not betting on eventually. And here's the stealth data point hiding in plain sight. You know, I love this shadow data. In the same minutes, the Fed noted the SP 500 rose nearly 6% between its April and June meetings, led by technology driven by higher earnings expectations. So sit with that irony. At the exact moment equity markets were celebrating AI earnings, the Fed was sitting in a room writing down that AI was making its inflation problem worse. The stock market and the bond market are telling two completely different stories about the same technology. And the Fed is stuck in the middle, refereeing a fight that it did not pick. So here's what to actually watch. The next Fed meeting is July 28th and 29th. That's just a few weeks away. The market is pricing roughly a 70% chance of another hold. But a hold is not an agreement. It is a ceasefire and a live argument about whether the biggest technology of our lifetime saves us from inflation or if it feeds it. Watch the next CPI print and watch core goods and watch whether Warsh keeps talking like a believer while his committee quietly reaches for the rate hike button. So your truth bomb for today is this the Fed just admitted in writing that the AI boom is inflating your prices today, while its new chair bets it will deflate them eventually. And eventually is the most expensive word in finance. Join me every day for Wall Street Truth Bombs, where I drop them right here before the market figures them out.