The artificial intelligence boom is starting to create an unexpected bill for consumers: more expensive electronics.
Memory chips are becoming one of AI's biggest bottlenecks, as data centers absorb an increasing share of global supply.
J.P. Morgan Global Research estimates DRAM prices could rise more than 400% from the start of 2024 through the end of 2026.
The result is what the bank calls "chipflation" and it could eventually make devices such as the iPhone more expensive.
AI Is Taking Memory Away From Consumers
The problem starts with DRAM, the short-term working memory used by computers, smartphones and other electronics.
AI data centers need huge quantities of high-speed memory to process increasingly complex workloads.
Hyperscalers are responding by locking up supply through long-term agreements with memory manufacturers, sometimes lasting five years or longer.
That leaves less flexibility for memory producers to serve consumer electronics manufacturers. J.P. Morgan says new capacity is unlikely to close the gap quickly.
"The market tends to underestimate the elongated pace of supply addition and new capacity buildout," J.P. Morgan equity analyst Jay Kwon said.
Kwon said the memory shortage could persist for years as AI workloads continue expanding.
That matters because memory is not a niche component. It sits inside almost every modern computing device, meaning a supply shock can spread far beyond data centers.
Companies like Micron Technologies Inc.
Consumers Are Already Absorbing 'Chipflation' Costs
J.P. Morgan says the consumer price index for software and accessories and the producer price index for storage devices have both risen 23% since the end of 2024. Import prices for computers, peripherals and parts have climbed 37%.
"Every 10% increase in hardware costs is estimated to raise core CPI and PCE inflation by around 0.1%," J.P. Morgan economist Abiel Reinhart said.
He estimated the memory-price shock could add 0.2%-0.4% to inflation.
Bank of America's economist Stephen Juneau sees the same mechanism.
In a recent note, Juneau highlighted that core goods prices rose 0.20% month over month in July, while IT commodities jumped 1.4%. Computers, software and accessories, and smartphones were among the categories affected by higher business-related AI demand.
In other words, AI is not yet simply a technology story. It is becoming a cost story.
That creates a second-order problem for consumers.
Even if smartphone makers initially absorb higher component costs, persistent memory inflation could eventually force higher retail prices.
The AI Boom Could Keep The Pressure On
This is where the story becomes more important for investors.
Bank of America expects AI to remain inflationary in the near term because of higher input costs and stronger consumer demand from the wealth effect.
The contradiction is striking: AI is supposed to make technology cheaper and more efficient over time. For now, however, building the AI infrastructure is making some hardware more expensive.
For consumers, that could mean the next iPhone arrives with a hidden AI surcharge.
For investors, the bigger question is how long memory remains scarce.
