Warsh believes America’s $700B AI buildout will lower prices — but his colleagues warn it will fuel persistent inflation

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Federal Reserve chair Kevin Warsh has adopted an optimistic view (1) around the AI spending blitz from large tech firms that’s reshaping the U.S. economy.

He argues that the spread of AI among American workers will increase their productivity and in turn boost corporate profits and employee paychecks without triggering inflation. But so far, many of his colleagues on the Federal Open Market Committee (FMOC) disagree with him.

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On July 8, minutes of the central bank’s June meeting (2) were published, the first for Warsh as Fed chairman. The transcript demonstrated heightened awareness among Fed policymakers of the risk of inflation, which was pushed up this year by the war in Iran disrupting commercial oil shipping and lingering tariffs.

However, Fed officials also showed a notable level of concern around the AI spending spree, as the four largest U.S. tech companies — Amazon, Meta, Microsoft and Alphabet — pour at least $700 billion (3) into developing data centers and the critical equipment needed to service them, such as semiconductors.

Fed policymakers, though, hit pause on adjusting interest rates in either direction. The benchmark interest rate still stands between 3.50 and 3.75%, unchanged since December.

Wall Street investors are pricing in a quarter-point rate hike later this year. Here’s why it matters for you and your fourth quarter.

AI anxiety at the Fed

The specific mention of the AI buildout during June’s two-day meeting is striking given that it wasn’t a subject of discussion (4) earlier in the year. Now, that’s changing with tech companies ratcheting up their spending commitments with little end in sight.

“Many participants noted that ongoing strong demand for AI infrastructure would likely sustain upward pressure on prices for technology products and electricity,” according to the FMOC minutes transcript.

The costs for consumers related to the AI buildout are becoming more evident. Back in June, Apple raised prices by at least $150 for Macbooks and iPads, citing a chip shortage that made critical components more expensive to obtain.

The transcript also said that “most participants” believe that robust AI business spending “could contribute to more persistent inflationary pressures.” Put simply, the AI spending rush could cause prices to steadily trend upward instead of a simple one-time jump.

But not everybody on the 11-member FOMC agreed. According to the transcript, “some participants” accepted the argument that AI adoption will enhance productivity and supply, and will eventually cause inflation to come down.

What Warsh and other Fed officials say about AI

While Warsh has recognized the gusher of AI spending in the economy, he maintains that it will alleviate price pressures on supply chains in the long run.

“The AI shock is leading to a boom in capital expenditures. We see that first and foremost in demand, but I’m confident we’re going to see it in supply at some point,” Warsh said at an annual European Central Bank forum (5) in June.

New York Fed President John Williams cited AI-related spending as a constant source of demand (6) that could eventually push the central bank to raise interest rates.

“If this creates a sustained impulse to demand relative to supply in inflation, I do think that’s the kind of situation where you don’t look through this,” he said at a New York Fed event on July 9.

AI spending spree to continue

Despite growing concerns that AI stocks have become overheated, Big Tech isn’t easing off the accelerator.

AI could remain one of the biggest drivers of corporate investment over the next several years. Wall Street analysts now expect total AI capital expenditures to surpass $1 trillion by 2027, with spending in 2026 projected to reach between $800 billion and $900 billion as companies race to build enough computing power to meet surging demand (7).

Still, not everyone is convinced all that spending will ultimately pay off — and some big names are speaking up.

On July 15, Fed Governor Lisa Cook warned that the industry’s massive investment cycle could fuel inflation by driving up prices for semiconductors, specialized equipment, software and electricity (8).

Former hedge fund manager and CNBC personality Jim Cramer (9) has also become increasingly cautious, arguing that investors eventually need proof these enormous expenditures are translating into meaningful profits.

“I need cold hard return facts,” he said recently. “Or, I, too, will grow more skeptical than I am now.”

Protect your finances now

The latest Bureau of Labor Statistics inflation report delivered a mixed message. Annual inflation came in at 3.5% in June, but prices actually fell 0.4% from the previous month, marking the sharpest monthly decline since April 2020 (10). While that’s encouraging news, it’s far from a guarantee that inflation pressures have disappeared.

Oil prices are currently hovering near their highest level since mid-June despite a modest pullback, with the conflict involving the U.S. and Iran continuing to keep energy markets on edge. As of July 9, prices fell about 1% but remain near mid-June highs (11).

Because energy costs influence everything from manufacturing to shipping, another spike in crude could quickly ripple through the broader economy.

Rather than letting inflation quietly erode your purchasing power, consider strengthening your financial position now. Investments that have historically delivered returns above the inflation rate can help your savings maintain their value over the long run.

Diversify with gold

For those worried about geopolitical uncertainty, hedging your portfolio against shocks and drops could be the first step — especially if you’re already established.

That’s where gold has historically played an important role for some. Unlike paper currencies, which can lose value when inflation accelerates, gold has often attracted investors looking for a store of value during periods of rising prices, market volatility and geopolitical uncertainty.

The precious metal has long been viewed as one way to diversify a portfolio when inflation remains stubbornly high. Over the last five years, gold prices have more than doubled, reaching multiple all-time highs and outperforming the S&P 500 over the same period.

Today, you can combine the inflation-resistant properties of the precious metal with the tax advantages of an IRA by opening a gold IRA with the help of Priority Gold.

And with Priority Gold’s platinum package, you can even get free account setup and insured shipping and storage for up to five years. Plus, you can also roll over your existing IRA or 401(k) into a precious metals IRA with Priority Gold — tax and penalty-free.

The best part? You can download Priority Gold’s wealth preservation guide for free and get up to $10,000 in complimentary silver upon making a qualifying purchase.

An easy alternative to precious metals

Gold isn’t the only asset investors use to defend against inflation.

Real estate has long been viewed as another effective inflation hedge because home values have historically appreciated over time, often outpacing inflation over the long run. On top of that, rental income has tended to rise alongside the cost of living, giving property owners an additional stream of cash flow that can help offset the impact of higher prices.

The good news is you no longer need hundreds of thousands of dollars — or the responsibility of becoming a landlord — to gain exposure to residential real estate.

And today, investing in real estate doesn’t necessarily mean taking out a mortgage, saving for a massive down payment, or dealing with tenants. You can invest in shares of single-family rental homes nationwide through platforms like mogul.

Founded by former Goldman Sachs real estate investors, mogul handpicks the top 1% of single-family rental homes nationwide for you. This way, you can invest in institutional-quality offerings for a fraction of the usual cost — while receiving monthly rental income, real-time appreciation, and tax benefits.

The team at mogul carefully vets each property, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average yearly return of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours.

Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

Earn returns on your uninvested cash

But not everyone is at a point where preserving your wealth is a priority. For some, it’s much more important to create a buffer to manage unexpected costs — whether prices increase due to a hot inflationary run or managing a sudden AI-driven job loss.

Even if you’re waiting for the right investment opportunity, your cash doesn’t have to sit idle.

High-yield cash accounts have become far more attractive in today’s higher-rate environment, giving savers the opportunity to earn meaningful interest without locking up their funds.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s 10 times the national deposit savings rate, according to the FDIC’s June report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

Take a closer look at your fixed bills

When inflation sticks around longer than expected, every recurring expense takes a bigger bite out of your budget. That’s why one of the smartest places to start isn’t necessarily cutting back on the occasional coffee — it’s taking a closer look at the bills you pay month after month.

While skipping small luxuries can help, your largest recurring bills often hold the greatest potential for savings. Even small reductions to your largest monthly bills can add up to hundreds, or even thousands, of dollars in annual savings, giving you more breathing room as prices remain elevated.

Insurance is one of the biggest opportunities.

The average U.S. driver now pays $1,163 for six months of auto insurance coverage, up 18% from a year ago (12). If you’ve been with the same insurer for several years or your driving record has improved, there’s a chance you’re paying more than necessary.

Shopping around and comparing rates through services like Insurify can help you uncover cheaper options.

Here’s how it works: Just answer a few basic questions, and Insurify will show you the most affordable deals in as little as three minutes.

Those who shop around and compare car insurance rates from different providers on Insurify and choose the best available deal save $1,100 on annual premiums on average.

Not only is the process 100% free, but you could also save up to 15% by bundling your car and home insurance.

— With files from Joseph Zeballos-Roig

Warsh believes America’s $700B AI buildout will lower prices — but his colleagues warn it will fuel persistent inflation

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