AI Chip Inflation Eases in July
Inflation made its mark in July, particularly in the realm of artificial intelligence. The severe price pressures observed in June have somewhat lessened across various categories, including computers, storage devices, circuit boards, copper, and aluminum. However, some lingering effects are still present in the physical infrastructure used for these builds.
The figures from June were concerning. For instance, the price of computer storage devices jumped by 8.3%, while bare printed circuit boards saw a staggering 22.2% increase. Non-ferrous wire and cable prices rose by 1.7%, and aluminum mill shape prices increased by 2.4%. It became evident that demand was outstripping supply.
By July, the majority of these price hikes had leveled off. Storage device prices held steady, and bare circuit board prices crept up only by 1.4%. Meanwhile, electronic parts and accessories dropped 0.7% after a modest rise of 0.6% in June. Furthermore, aluminum profiles fell by 1.6%, while copper and brass profiles decreased by 2.9%. A notable 7.6% dip was reported in primary non-ferrous metals.
Year-over-year statistics still reveal significant increases. Storage devices rose by 28.8% compared to last year, while bare circuit boards increased by 45.4%. Aluminum mill shape prices have climbed by 40.5%, and copper wire and cable saw a 17.9% increase.
Recent data on metals supports the idea that June’s surge has waned. Primary non-ferrous metals experienced a decline of 7.6%, aluminum profiles dropped by 1.6%, and copper and brass profiles decreased by 2.9%. Additionally, the growth rate for copper wire and cable slowed from 2.2% to just 0.2%. Still, the yearly increases have been quite pronounced—primary non-ferrous metals up by 52.8%, aluminum profiles by 40.5%, and copper wires by 17.9%. Clearly, the downward trend in July is visible.
Some of the most striking annual increases in electronics include a 172.6% rise in loaded printed circuit assemblies and modules, which had remained stable in May and June but edged up by 0.4% in July. This surge in annual pricing can largely be attributed to earlier increases, like a notable 25% jump in April. It resembles the dynamic where rising prices correlate with increased supply.
Inflation Shifts Toward Construction
With the current pace of investment, it doesn’t seem that demand is cooling. In fact, it may be that supply has finally managed to catch up. This theory is bolstered by the observation that inflation related to AI augmentation is transitioning from computing hardware to equipment needed for supply and cooling purposes. Prices for transformers and power regulators increased by 4.2% in July, with sales of power and distribution transformers climbing by 4.6%. Industrial controls also saw an increase of 3.9%.
Construction costs mirror this trend. For instance, the construction of new office buildings (including data centers) remained steady in June but rose by 2.5% in July. Industrial building construction experienced a 2.4% increase, while warehouse construction went up by 2.2%. Additionally, prices charged by nonresidential electrical contractors rose by 1.3%, and plumbing, heating, and air conditioning contractors raised prices by 2.4%.
In essence, it appears that microprocessors have taken over from electrical engineers as the go-to items for AI development in July.
Moreover, there’s possibly some spillover from AI demand into consumer inflation. Personal computer prices saw an 18.1% increase in July, with laptops not far behind at 17.7%. Recently, Apple revealed significant price hikes, citing higher costs for memory and storage as the primary reason. “We’ve never experienced such rapid increases in component prices,” Apple stated. “Although we’ve traditionally shielded our customers from these spikes, it has reached a point where we need to start adjusting prices on many of our products, including iPads and Macs.”
