The key to bringing inflation down? "Build more data centers"

Americans are already paying more for electricity because of the data center boom. But BlackRock CEO Larry Fink argues that not building enough data centers could be even more inflationary.

It's a counterintuitive argument at a time when there's evidence that AI infrastructure is already pushing up energy costs.

The cost of not building

"If we don't build out these data centers, it is actually more inflationary because the cost of compute is so high right now," Fink said in a recent interview.

"And the faster we can build out more data centers, the more compute we have, the faster we can bring down the cost."

His argument is that expanding computing capacity will lower the cost of using AI, allowing businesses to reduce labor costs and improve productivity.

In theory, those savings could help bring down inflation in the future, but not without short-term pain because building more data centers could push up costs in the first place.

Americans are already paying more

Electricity bills are already going through the roof, making Fink's argument a hard sell.

U.S. residential electricity prices have risen 40% since 2019, with increases of 70% to 90% in states such as Maine, California, and New York, according to Fed and BLS data.

While not all of those increases are related to AI, data centers are adding to electricity demand at a time when energy costs are already rising.

📌 Bottom line: Fink's idea rests on two assumptions: 1) businesses will become more productive, and 2) businesses will pass their cost savings on to consumers through lower prices. The problem is that trickle-down economics hasn't been largely disproven.