The Cost of Intelligence: Who Pays for the AI Boom?
This week’s insight tosses around a political football.
Yes, the midterm elections are about 13 months away, and both sides are gearing up for a fierce battle. The usual issues will be at hand, including the economy, national security, immigration, and social issues. Of course, all of it will play out in today’s 24/7 cable-news world and social media–ridden culture.
Tariffs, trade policy, and Trump will be in the spotlight. Terawatts, too. Amid the AI boom, the cost to power the vast data center buildout is growing, and it’s hitting American families and small business owners hard. According to recent price data, electricity bills are climbing more than twice as fast as the overall inflation rate. ChatGPT and other apps may be helpful, but at what point will lawmakers and politicians take aim at big tech for forcing everyday Americans to foot the bill?
Of course, it’s not that simple, but I suspect that will become the prevailing political talking point. It’s also a tagline both sides could agree on. Governor DeSantis recently blasted the AI supercycle for driving up energy use, insisting that data centers should bring their own power generation if they want to call the Sunshine State home.
On the left, we can be sure that folks like Democratic Senator Elizabeth Warren will point a stern finger at the likes of Microsoft, Alphabet (parent company of Google), Amazon, Meta (Facebook), and Oracle. Those AI hyperscalers are the primary buyers of semiconductor chips designed by NVIDIA and manufactured by foundry companies worldwide.
What are we as consumers, taxpayers, and investors to do? Let all the vitriol play out on the political field. See to the end of the game, which will be a more data-driven, tech-enabled world, regardless of the roadblocks that Republicans and Democrats attempt to construct. That’s the thing about capitalism and free markets—regulators may be able to stunt progress, but innovation ultimately wins.
That’s not to suggest that some fear and even pain won’t be in the offing. These sorts of technological and societal transitions don’t come without frictions. The good news is that history reveals time and again that such periods of innovative progress ultimately create more jobs than they destroy, spawning new industries and a higher standard of living.
Electricity inflation is 6.2%, up from 1.9% in January. It was 16.0% in August 2022.
Source: U.S. Bureau of Labor Statistics via FRED
