AI-driven inflation is 2026’s most overlooked risk: investors

Global stock markets, riding high on Al euphoria at the start of 2026 may be disregarding one of the biggest threats that could spoil the party: a surge in inflation driven partly by the tech investment boom.

- NAOMI ROVNICK LEWIS KRAUSKOPF

Plastic letters spell out 'inflation' on a US dollar banknote. An AI data-centre building spree will contribute to price pressures in 2026, analysts say.

(REUTERS)

US stock indexes, where seven tech groups contributed half of all market earnings last year, made double-digit gains in 2025 to hit record highs as exuberance about Al and monetary easing also propelled European and Asian equities to record peaks.

Expectations for further rate cuts have buoyed bonds too, handing US Treasury investors the best annual performance for five years as inflation retreated, although it remains above the Federal Reserve's average 2% target.

For 2026, waves of government stimulus in the US, Europe and Japan as well as the Al boom are expected to refuel global growth.

This has money managers bracing for inflation to re-accelerate, prompting central banks to end their rate-cutting cycles, slamming the brakes on the easy money flow into Al-obsessed markets.

"You need a pin that pricks the bubble, and it will probably come through tighter money,’ said Trevor Greetham, head of multi-asset at Royal London Asset Management. He said that while he was holding on to big tech stocks for now, he would not be surprised to see inflation booming worldwide by the end of 2026.