Foreign media reports that research firm BCA Research believes the Federal Reserve may have underestimated the inflation-boosting effect of the AI investment boom. If interest rates remain low as a result, stock market valuations could continue to rise, and the risk of a bubble could accumulate.

AI investment drives up key costs

Peter Berezin, Chief Global Strategist at BCA, stated that the demand for AI infrastructure is driving up costs across several key areas, including electricity, data centers, and memory chips. This means that AI is not just a technology focused on improving productivity; it may also lead to higher construction and operating expenses in the short term.

Based on this assessment, the problem extends beyond the technology sector. If related costs continue to rise, inflation may decline more slowly than the market expects, thus impacting the Federal Reserve's assessment of the interest rate path.

Low interest rates may continue to boost the stock market.

The article argues that if policy interest rates do not fully reflect these price pressures, the relatively loose financial environment may continue to support rising stock prices. Rising asset prices could then stimulate consumption and risk appetite, creating new inflationary pressures.

BCA cautions that this transmission doesn't only affect tech stocks. The wealth effect from a rising stock market could lead to increased spending by households and businesses, thus spreading price pressures more broadly.

The market has not yet turned bearish, but risks are accumulating.

Berezin did not define the current market as a bear market, but he mentioned several risks to watch, including a slowdown in AI capital expenditure, overheated speculative trading, and the potential widening income gap that may result from the widespread adoption of AI.

BCA also points out that the long-term impact of AI on the economy remains highly uncertain. However, from a longer-term perspective, if AI continues to drive up investment demand and resource prices, the central level of real interest rates may be further raised.