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Fed’s Williams sees AI supply squeeze lasting beyond 2 years
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New York Fed President John Williams said in a Bloomberg interview on Tuesday that supply of artificial-intelligence equipment may need more than two years to catch up with demand. He warned the imbalance could add to inflationary pressure as AI infrastructure expands.
The AI boom has driven up prices for advanced chips and the goods that rely on them. That supply squeeze is now a macroeconomic concern, not just a tech-sector issue. Williams expects the shortage to run longer than two years.
Asked whether AI supply and demand would balance within two years, Williams said, "I think it’s going to take longer." He added that this assumes the demand impulse continues as expected, which he called a big assumption. He reaffirmed the Fed may need one more rate hike this year.
"I haven’t changed my view that it may be appropriate to have one more rate hike," Williams said. For 2027, he said "we’ll have to see," adding he has no reason now to believe more hikes would be needed. He still expects AI investment to remain strong even if rates rise.
Higher rates typically cool investment, but Williams said AI investors are "relatively price insensitive." They expect huge productivity gains and transformative economic changes, so monetary policy may not deeply affect their spending. That could keep pressure on chip and equipment supply.
The shortage may affect Bitcoin miners expanding into AI, as they compete for chips and power equipment. IREN signed $2.8 billion in new AI cloud contracts in July. Cointelegraph reported Monday that miners pursuing AI projects face substantial financing needs and selective lenders.
Williams’ outlook suggests AI-driven inflation could persist alongside tight supply. The Fed will weigh that risk as it decides whether to raise rates this year. He sees no case for additional tightening beyond one more hike.
