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Goldman Sounds Alarm on AI-Driven Inflation: ETFs to Watch
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Key Takeaways
Goldman sees AI adding to inflation before long-term productivity gains emerge.
Chips, software and power demand are fueling the next wave of inflation.
ETFs such as QUAL, VTV and VIG could help cushion the impact.
Inflation remains one of the biggest concerns for investors in 2026, though the catalyst behind the fears has changed over time. Earlier this year, investors were focused on the risk of oil-driven inflation as the Middle East conflict pushed energy prices higher. However, as the conflict de-escalated, diplomatic efforts gained momentum, oil prices retreated and the concerns gradually eased.
Now, a new inflation narrative has emerged, with economists increasingly warning that the global AI boom could create fresh price pressures. Goldman Sachs (GS - Free Report) cautions that the rapid adoption of AI is likely to fuel inflation globally as supply struggles to keep pace with soaring demand for critical AI components, including memory chips and semiconductors.
According to a Business Insider article, as cited by Yahoo Finance, the Wall Street giant expects the United States to be hit hardest by AI-driven inflation. Goldman forecasts that AI is already adding roughly 20 basis points annually to U.S. core Personal Consumption Expenditures (PCE) inflation. That contribution is expected to more than double to 50 basis points by year-end as AI adoption accelerates and supply constraints persist.
Understanding the Drivers of AI-Driven Inflation
Higher memory chip prices, software costs and electricity expenses are fueling the next wave of AI-driven inflation. As AI adoption gathers pace, Goldman expects software and accessories prices in the United States to climb sharply, with prices projected to rise about 30% year over year by November. The category also carries greater weight in the U.S. inflation basket, accounting for roughly 1% of core PCE inflation, more than double its share in other developed economies.
The investment bank also expects memory-related inflation to be more pronounced in the United States than in other countries.
Beyond rising chip and software costs, energy is emerging as another major source of inflationary pressure. As AI adoption accelerates, the rapid expansion of data centers is driving a sharp increase in electricity demand. At the same time, sustained increases in energy prices could push up electricity generation costs, further amplifying the broader inflationary pressures associated with the AI buildout.
The outlook is further complicated by geopolitical developments. Renewed tensions in the Middle East, following the collapse of the ceasefire, have reignited concerns over higher oil prices. If energy costs remain elevated while electricity demand from AI infrastructure continues to climb, the combination could intensify price pressures across the economy.
However, there is a silver lining. While AI is expected to generate near-term inflationary pressures, its long-term productivity gains could ultimately help bring inflation lower. The timing, however, remains uncertain, as it is unclear how long the initial price pressures will persist before those disinflationary benefits begin to emerge.
Stay Ahead of Rising Inflation With These ETFs
Rising inflation headwinds are likely to weigh on investor finances, encouraging a more cautious, risk-aware approach and a reassessment of portfolios. Below, we have highlighted a few ETF areas that investors may consider expanding their exposure to, as the risk of inflation increases.
Quality ETFs
Amid market uncertainty, quality investing emerges as a strategic response, providing a buffer against potential headwinds. Investing in such high-quality companies can mitigate volatility for investors.
Investors can look at funds like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500Quality ETF (SPHQ - Free Report) and JPMorgan U.S. Quality Factor ETF (JQUA - Free Report) .
Value ETFs
Investors can leverage value investing, a strategy particularly compelling in today’s economic environment. Value investing through ETFs offers investors an easy and accessible way to follow this strategy. Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value.
Investors can consider Vanguard Value ETF (VTV - Free Report) , Avantis U.S. Large Cap Value ETF (AVLV - Free Report) and Vanguard Small Cap Value ETF (VBR - Free Report) .
Dividend ETFs
Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. These stocks offer dual advantage safety, in the form of payouts, and stability in the form of mature companies that are less volatile to large swings in stock prices. Companies offering dividends often act as a hedge against economic uncertainty.
Investors can consider Vanguard Dividend Appreciation ETF (VIG - Free Report) , Schwab US Dividend Equity ETF (SCHD - Free Report) and Vanguard High Dividend Yield Index ETF (VYM - Free Report) , with dividend yields of 1.50%, 3.23% and 2.25%, respectively.
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Goldman Sounds Alarm on AI-Driven Inflation: ETFs to Watch
Key Takeaways
Inflation remains one of the biggest concerns for investors in 2026, though the catalyst behind the fears has changed over time. Earlier this year, investors were focused on the risk of oil-driven inflation as the Middle East conflict pushed energy prices higher. However, as the conflict de-escalated, diplomatic efforts gained momentum, oil prices retreated and the concerns gradually eased.
Now, a new inflation narrative has emerged, with economists increasingly warning that the global AI boom could create fresh price pressures. Goldman Sachs (GS - Free Report) cautions that the rapid adoption of AI is likely to fuel inflation globally as supply struggles to keep pace with soaring demand for critical AI components, including memory chips and semiconductors.
According to a Business Insider article, as cited by Yahoo Finance, the Wall Street giant expects the United States to be hit hardest by AI-driven inflation. Goldman forecasts that AI is already adding roughly 20 basis points annually to U.S. core Personal Consumption Expenditures (PCE) inflation. That contribution is expected to more than double to 50 basis points by year-end as AI adoption accelerates and supply constraints persist.
Understanding the Drivers of AI-Driven Inflation
Higher memory chip prices, software costs and electricity expenses are fueling the next wave of AI-driven inflation. As AI adoption gathers pace, Goldman expects software and accessories prices in the United States to climb sharply, with prices projected to rise about 30% year over year by November. The category also carries greater weight in the U.S. inflation basket, accounting for roughly 1% of core PCE inflation, more than double its share in other developed economies.
The investment bank also expects memory-related inflation to be more pronounced in the United States than in other countries.
Beyond rising chip and software costs, energy is emerging as another major source of inflationary pressure. As AI adoption accelerates, the rapid expansion of data centers is driving a sharp increase in electricity demand. At the same time, sustained increases in energy prices could push up electricity generation costs, further amplifying the broader inflationary pressures associated with the AI buildout.
The outlook is further complicated by geopolitical developments. Renewed tensions in the Middle East, following the collapse of the ceasefire, have reignited concerns over higher oil prices. If energy costs remain elevated while electricity demand from AI infrastructure continues to climb, the combination could intensify price pressures across the economy.
However, there is a silver lining. While AI is expected to generate near-term inflationary pressures, its long-term productivity gains could ultimately help bring inflation lower. The timing, however, remains uncertain, as it is unclear how long the initial price pressures will persist before those disinflationary benefits begin to emerge.
Stay Ahead of Rising Inflation With These ETFs
Rising inflation headwinds are likely to weigh on investor finances, encouraging a more cautious, risk-aware approach and a reassessment of portfolios. Below, we have highlighted a few ETF areas that investors may consider expanding their exposure to, as the risk of inflation increases.
Quality ETFs
Amid market uncertainty, quality investing emerges as a strategic response, providing a buffer against potential headwinds. Investing in such high-quality companies can mitigate volatility for investors.
Investors can look at funds like iShares MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) and JPMorgan U.S. Quality Factor ETF (JQUA - Free Report) .
Value ETFs
Investors can leverage value investing, a strategy particularly compelling in today’s economic environment. Value investing through ETFs offers investors an easy and accessible way to follow this strategy. Value ETFs focus on stocks characterized by strong fundamentals and robust financial health, which trade below their intrinsic value.
Investors can consider Vanguard Value ETF (VTV - Free Report) , Avantis U.S. Large Cap Value ETF (AVLV - Free Report) and Vanguard Small Cap Value ETF (VBR - Free Report) .
Dividend ETFs
Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. These stocks offer dual advantage safety, in the form of payouts, and stability in the form of mature companies that are less volatile to large swings in stock prices. Companies offering dividends often act as a hedge against economic uncertainty.
Investors can consider Vanguard Dividend Appreciation ETF (VIG - Free Report) , Schwab US Dividend Equity ETF (SCHD - Free Report) and Vanguard High Dividend Yield Index ETF (VYM - Free Report) , with dividend yields of 1.50%, 3.23% and 2.25%, respectively.