Good morning, investors. It’s inflation day, and the latest numbers are set to release at 8:30 AM in New York.

Relief at the pump should mean relief on the headline CPI figure, but the all-encompassing AI boom might have something else to say on price increases.

The inflation picture isn’t as bad as economists had feared at the start of the Iran conflict.

Thanks to falling energy prices over the last month, economists expect CPI cooled to 3.8% year-over-year in June, below the 4.2% seen in May.

But even if gas and oil prices continue to trend lower — and that’s a big “if” given the on-and-off Strait of Hormuz closures — the AI boom could drive near-term inflationary pressures of its own.

Veteran strategist Ed Yardeni argues it’s already showing up in the data:

Plus, AI memory costs have skyrocketed. That’s led companies like Apple and Microsoft to raise prices on laptops and gaming consoles.

Meanwhile, the wage-inflation measure from the New York Fed reveals stronger wage growth in construction and mining, which could also be chalked up to data center buildout.

Even though AI as a technology can be disinflationary long-term, the data suggest that in the near term it is inflationary, which ultimately could make the Federal Reserve more inclined to raise interest rates than cut.

Markets have already been leaning that way for months. CME data currently points to a roughly 40% chance of a rate hike in July, up from just 8% a month ago.

It makes sense to be bullish on AI as a technology over the long run while still expecting it to cause near-term negative disruptions to the economy.

The former just about necessitates the latter.

If the technology is that good, it should eventually allow people and businesses — and so the economy — to do more with less.

But getting to that point requires shifting economics, heavy capex investment and new infrastructure.

Indeed, productivity is already picking up and unit labor costs grew just 0.5% last quarter, the slowest rate since 2019.

Even if AI includes the promise of lower prices on the horizon, that doesn’t mean higher prices won’t hit first.

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🛢 President Trump proposed a 20% toll on all cargo passing through the Strait of Hormuz. The blockade restart pushed Brent crude back above $80 a barrel and kept shipping traffic through the oil chokepoint near zero. (CNBC)

🚀 SpaceX stock fell near its $135 IPO price. BofA analyst Ron Epstein initiated coverage last week with a Buy rating and a $235 price target, arguing SpaceX's Falcon and Starship launch costs will unlock space-based data centers over the next decade. (Yahoo Finance)

🤖 TSMC reported a 68% year-over-year jump in June sales. Revenue at the world's largest contract chipmaker hit NT$2.4 trillion in the first half of 2026, ahead of Thursday's earnings report and the latest data point on AI processor demand. (CNBC)

🗓 July 14, 2015: The US and Iran signed the Joint Comprehensive Plan of Action nuclear deal in Vienna.

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