AI Build-Out Drives Consumer Prices Higher, Hidden Debt Risk Emerges, Earnings Quality Questioned

AI infrastructure build-up pushing up consumer prices (software up 15% YoY). FOMC minutes explicitly cited AI as an inflation driver. Alphabet doubled capex to $205B but negative free cash flow. Microsoft shows AI monetization, Meta miss reignites concerns. $1.65T off-balance-sheet AI commitments. New data: AI delivering 180 bps margin growth for S&P 500 companies. However, Q2 earnings growth of 52% is distorted by AI mark-to-market gains; ex-gains growth is 33%, and Nvidia-OpenAI guarantee raises circular financing concerns. KRW strengthening and credit spread widening in semis (Broadcom, Nvidia) links Korean capital flows to AI trade vulnerability. Senator Warnock pushed Fed Chair Warsh to include labor representatives in the new AI task force, highlighting conflict-of-interest concerns with all three advisors tied to AI industry.