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The artificial intelligence investment boom that helped accelerate U.S. economic growth in early 2025 is simultaneously pushing wholesale inflation to uncomfortable highs, according to Wells Fargo analysts who see the price pressure persisting through 2027. Gross domestic product expanded at a 2 percent annual rate in the first quarter, a marked improvement from the 0.5 percent pace in the final three months of 2025, the Bureau of Economic Analysis reported. While the reading fell short of economist forecasts, the St. Louis Federal Reserve's Hannah Rubinton said AI accounted for 39 percent of GDP growth through the third quarter of 2025, a contribution that exceeded the 28 percent share at the height of the dot-com bubble in 2000.
Rubinton cautioned that quarterly growth rates in AI investment have already begun to taper, even as the spending continues to provide a positive lift. That deceleration has not prevented the capital expenditure cycle from feeding into producer prices, Wells Fargo analysts argue. The producer price index climbed 6.5 percent year over year in May, and core PPI, excluding food and energy, rose 4.9 percent in May after increasing 2.7 percent in June 2025. Jennifer Timmerman, a Wells Fargo analyst, attributed much of the acceleration to brisk spending on AI-related technology and automation, alongside tariff increases over the past year.
The firm identified three specific transmission channels: global shortages of semiconductors and industrial inputs, elevated energy costs tied to the explosion of data-center capacity, and what it described as panic ordering by companies racing to secure resources for data-center construction and manufacturing expansion. Timmerman said the scale of AI-related order backlogs for capital goods is substantial enough to keep investment spending elevated through the firm's 2027 forecast horizon, implying that PPI inflation will remain uncomfortably high for the foreseeable future.