AI Boom Sparks Inflation Surge, Leaving Young Workers Skeptical of Promised Payoff

Artificial intelligence, heralded as the next driver of economic growth, is currently contributing to rising inflation rather than delivering immediate productivity gains. Major financial institutions like Goldman Sachs and J.P. Morgan warn that AI-related expenses are pushing up prices across hardware, software, and energy sectors.

This inflationary pressure is fueling skepticism among younger workers, especially Gen Z, who are increasingly doubtful about AI’s promised benefits. As costs rise and productivity gains remain elusive, many question whether the AI revolution will truly improve their economic prospects.

Why AI Is Driving Inflation Now

Despite AI’s long-term potential to boost productivity, its current expansion is inflating costs in several key areas. Goldman Sachs economist Manuel Abecasis estimates AI-related price pressures have added roughly 0.3 percentage points to core PCE inflation over the past year, with similar effects expected to continue.

• Hardware shortages: Soaring demand for AI infrastructure components like memory chips and batteries is pushing up prices for computers and smartphones by about 10%.
• Software subscription hikes: Companies are raising prices on AI-enhanced software, with Microsoft, Adobe, and Intuit implementing significant increases without adjusting for improved features.
• Rising electricity costs: Data centers powering AI consume vast amounts of energy, contributing to a 4.6% rise in consumer electricity prices and adding to inflation.

Skeptics Warn: AI’s Productivity Boom May Be Overhyped

Not everyone is convinced that AI will deliver the economic benefits it promises. Johns Hopkins economist Steve Hanke has compared the AI surge to the dot-com bubble, calling it “overhyped and potentially dangerous.” Meta’s former AI chief Yann LeCun also criticizes large language models for their superficial understanding of reality.

“Welcome to the real world. Forget the AI bubble. You know, it didn’t deliver.”—Steve Hanke, Johns Hopkins economist

Goldman Sachs data shows no significant link between AI investment and overall productivity growth so far, with $700 billion spent in 2025 contributing virtually nothing to GDP growth.

Gen Z’s Growing Distrust and Resistance to AI

The generation most targeted to embrace AI—Gen Z—is increasingly skeptical. Gallup polls reveal a 14-point drop in excitement about AI over the past year, alongside rising anger and persistent anxiety. Daily users of AI tools are the most distrustful.

This frustration has led 44% of Gen Z workers to actively undermine AI rollouts by misusing tools or refusing to engage, reflecting concerns that AI is limiting career growth rather than creating opportunities.

“AI is making coworkers dumb and lazy, eroding critical thinking in the workplace.”—Gen Z respondents, Wharton survey

Looking Ahead: When Will AI’s Productivity Payoff Arrive?

Financial experts anticipate an eventual shift where AI’s productivity gains will help reduce inflation, following historical patterns of technology-driven economic cycles. However, this payoff remains years away, with inflation expected to peak near 3.9% in the near term—well above the Federal Reserve’s target.

Economists warn that premature easing of monetary policy based on AI optimism could prolong inflation. Meanwhile, the economy is entering an “inflationary boom” phase, where investment surges but consumer spending slows, further straining households already burdened by rising costs.

For now, the AI revolution faces a critical test: overcoming inflationary challenges and rebuilding trust among workers who are increasingly doubtful about its promised benefits.