New York Federal Reserve Williams: The shortage of AI chips may continue for more than two years, af

Core Summary

Williams supports raising interest rates in September: John Williams, president of the Federal Reserve Bank of New York, stated that it might be appropriate to raise interest rates once more this year. He believes there is no need to do so again until 2027, but the final decision will depend on economic data.

It may take several years for AI chip supply to meet demand: Williams noted that the development of artificial intelligence has led to “surprising and significant” increases in the prices of chips and related products. He estimated that it will take over two years for supply and demand to balance out. He expects inflation to reach around the Fed’s target of 2% by the end of 2027.

Bitcoin miners entering the AI field may face more competitive competition: Due to AI investors’ relatively low sensitivity to price changes, along with shortages in chips and power equipment, Bitcoin miners transitioning into the AI sector will face fierce competition from other technology companies.

Why does Williams support raising interest rates in September?

In an interview with Bloomberg News, Williams pointed out that the three main factors driving inflation this year are tariffs, high energy prices related to conflicts in the Middle East and Russia, as well as the demand created by the construction of AI infrastructure.

He said that the impact of tariffs has largely become a thing of the past. However, energy prices remain high, and they are gradually affecting other costs such as airline tickets and food prices. Although risks have changed, the U.S. economy continues to show resilience. Williams believes that risks related to employment have decreased, while inflation risks have slightly increased.

Currently, the unemployment rate remains at a low level of 4%, wages are growing moderately, and the economy is not overheating. Williams expects inflation to decline next year, with potential targets close to the Federal Reserve’s 2% goal by the end of 2027.

It may take several years for AI chip supplies to keep up with demand

. Williams mentioned that the surge in AI development has led to “significant and sudden” increases in the prices of chips and related products. Labor costs in the construction industry also show signs of rising earlier than expected. When asked whether the AI supply chain could achieve balance between supply and demand within two years, Williams said, “I think it will take longer.” He emphasized that this prediction relies on the assumption that demand will continue to grow as expected, but this is itself a major source of uncertainty.

He pointed out that AI investors are relatively insensitive to price changes, so higher interest rates will have limited impact on AI spending. Although high chip prices motivate manufacturers to expand their facilities, this takes time. In the long term, the productivity gains brought about by AI could help reduce future inflation levels.

In terms of the market, Williams said that stock markets are very active. The yield on ten-year government bonds is near 5%, and higher borrowing costs are affecting home buyers and businesses.

Shortages of hardware may exacerbate the challenges faced by Bitcoin miners in transitioning to AI-related industries

. According to media reports, shortages of AI-related equipment could affect Bitcoin miners who are transitioning into the AI sector. These companies will need to compete with technology giants for the same resources, including chips and power equipment.

For example, the miner IREN signed a new AI cloud contract worth $2.8 billion in July. Anthropic also reached a computing power deal with the miner Riot, worth $900 million. Recent reports indicate that miners involved in AI projects are facing significant financial challenges, and lending institutions have become more cautious and selective in their lending practices.