Weekly Buzz: An AI productivity boom could be just what central banks need

Amazon, Meta, Microsoft, and Alphabet are set to spend a combined US$650 billion on AI infrastructure this year. If AI makes businesses meaningfully more productive, the effects could reach further than corporate bottom lines. It could help solve a problem central banks have been wrestling with for years: sticky inflation.

What’s going on here?

Central banks, like the Federal Reserve (Fed), have spent years trying to drag inflation back down from post-pandemic highs. Their go-to tool – adjusting interest rates – works best when inflation is demand-driven. Raise rates, cool spending, and prices ease.

Much of today's inflation, though, stems from the supply side: disrupted energy flows, higher input costs, and strained supply chains. Rate hikes don't do much against those forces.

AI could offer a solution. When businesses produce more with fewer resources, the supply of goods and services grows. Economists call this a positive supply shock. That kind of boost would also validate the enormous sums Big Tech is staking on the buildout.

Not everyone is sold, though. Fed Chair Jerome Powell has said that the AI boom is itself pushing prices higher in the short term, with surging demand for electricity, chips, and data centre construction adding to costs before any productivity gains kick in.

What’s the takeaway?

The debate on AI spending tends to focus on whether Big Tech gets its money back. For the broader economy, the question is simpler: do AI's productivity gains bring prices down, or does the cost of building all this infrastructure push them up first? If productivity wins out, central banks get room to lower interest rates. That's good news for investors, since lower rates tend to lift asset prices across the board.

(A diversified portfolio is the best way to invest in a productivity boom; start with General Investing. To invest in the firms building AI themselves, see Flexible Portfolios.)

In Other News: The world’s plugging in and solar’s leading the charge

In recent reports, the International Energy Agency expects global electricity demand to jump by nearly 1,100 terawatt hours per year through 2030. That's roughly one Canada's worth of added energy consumption each year. Data centre power use rose 17% last year, while EV sales jumped over 20% to more than 20 million units.

On the supply side, solar accounted for more than 25% of the growth in global energy supply, the first time a modern renewable source has led the pack. The 600 terawatt hours of solar added in 2025 was the largest single-year increase ever recorded for any electricity generation technology. Renewables and nuclear together met nearly 60% of energy demand growth. Battery storage was the fastest-growing power technology of the year.

The world is more power-hungry than ever, and the Strait of Hormuz's disruption has put that into sharp focus. Around one-fifth of global LNG trade flows through the Strait, and natural gas still generates about 22% of the world's electricity. Energy security is top priority for governments, and homegrown power sources are looking more essential by the day.

The takeaway for investors is that the world needs more power. Whether it's AI or EVs, the demand curve is hard to argue with. That puts the firms building the infrastructure to deliver it, from solar and battery storage to grid upgrades, in a strong position for years to come.

(Want exposure to the firm building the world's energy future? Check out Flexible Portfolios.)

These articles were written in collaboration with Finimize.