Have you noticed your electricity bill was extremely high this month? Well it’s not JUST those holiday decorations contributing to that. According to recent insights from J.P. Morgan, AI data centers can be the one to blame for the sudden spike.
Despite being a small part of the economy, the AI data center build-out has quietly become a key driver of growth this year. While many households have not felt this boom directly, they are likely to feel its knock-on effects, particularly in their utility bills.
As the chart shows, electricity inflation tracked CPI over the past decade, but in the last five years it has accelerated ahead. This shift reflects a surge in demand, driven partly by broader electrification but increasingly by power-hungry AI infrastructure. Data centers have existed for years, but AI facilities are far more energy-intensive: a single AI search can consume around 10 times more energy than a basic web search. After growing about 0.5% annually over the two decades through 2020, conservative estimates project that electricity demand will grow more than thrice as fast this decade. On the supply side, although the administration has declared an “energy emergency,” paving the way for more fossil fuels and even nuclear power plants, these projects will take time to come online.
Meanwhile, consumers could face higher near-term inflation as there’s a risk of a repeat of what auto insurance did in 2023-24: despite its modest weight, it became a sticky source of inflation. Electricity has a similar weight and, like auto insurance, is subject to regulatory pass-throughs that allow higher costs to be passed on to consumers.
To read JPMorgan’s full breakdown click here. If this has you thinking about your financial planning/investment portfolio we’d be happy to give it a second look. Schedule a complimentary consultation with us to get started.
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