New York Fed's Williams says AI chip supply may lag demand for over two years

New York Fed President John Williams told Bloomberg in an interview on Tuesday that AI equipment supply could take more than two years to catch up with demand, which he said could add to inflationary pressure, according to Cointelegraph. Asked whether AI supply and demand would balance over the next two years, Williams replied that he thinks it will take longer, adding that the assumption is demand keeps growing. He said the buildout of AI infrastructure is pushing up chip prices and the prices of goods that use those chips. The comments came as Williams reaffirmed that the Federal Reserve may need one more rate hike this year while it works to bring inflation down, quoting him as saying he has not changed his view that it may be appropriate to have one more rate hike. On 2027 he was more open-ended, saying the Fed will have to see, and that he does not think at this time he has any reason to believe it would need to do more. Williams also said he expects AI investment to stay strong despite higher rates because he believes investors there are relatively price insensitive and expect large productivity gains.