🚨 AI MAY BE TRIGGERING THE THIRD WAVE OF INFLATION.

Even Tim Cook said this cost jump is something he hasn't seen in over 40 years in the business.

Tariffs can get negotiated. Oil prices can reverse when supply catches up. But this one doesn't work that way.

AI infrastructure spending isn't a price shock, it's a demand shock that's still in its early.

The five biggest hyperscalers are spending $741 billion this year, up 75% from last year, and most of that money hasn't even hit the ground yet.

That means the price pressure happening right now is just the opening phase, not the peak.

The mechanism is simple: AI needs memory chips. So does everything else.

Phones, consoles, cars, laptops all draw from the same limited chip supply, so when AI scales up its orders, it doesn't just raise AI costs, it raises the cost of nearly every electronic product on the market.

That's playing out in real time today.

Apple and Microsoft both announced price hikes on MacBooks, iPads, and Xbox consoles, the same day, citing the same memory shortage.

Nintendo and Sony already did the same thing weeks earlier.

This isn't an isolated company passing on costs, it's an entire hardware industry repricing around the same input shortage simultaneously.

The bet from the Fed is that AI eventually pays for itself through productivity gains that push inflation back down.

That bet might be right eventually. But UBS says that payoff is still years out, while the price increases are happening now.

Which means the Fed is being asked to hold rates steady or higher through a multi year stretch where the thing supposed to eventually fix inflation is actively making it worse in the meantime.

That's a much harder position for Warsh to defend than the temporary tariff and oil shocks the Fed has navigated so far.