AI’s Physical Buildout Is Fueling a New Inflation Regime

MFS argues investors are underestimating the physical and inflationary consequences of the AI boom, which increasingly depends on scarce infrastructure, energy, labor, and industrial capacity. 

• AI may ultimately prove deflationary, but its near-term deployment requires enormous investment in data centers, semiconductors, transmission grids, cooling systems, and raw materials.
• Years of underinvestment have left the global economy structurally constrained, contributing to persistent inflation and higher interest rates.
• The report argues the investment regime has shifted away from financial engineering toward scarcity, reinvestment, resilience, and pricing power.
• With equity risk premiums near multi-decade lows, MFS sees stock selection becoming increasingly important as margin pressure separates winners from losers.

The central question, according to MFS, is no longer whether AI changes the economy — but which companies can absorb the costs of building it.