Williams Sees AI Supply Shortage Lasting More Than Two Years

Remarks by New York Fed President John Williams came as he reaffirmed his view that the U.S. Federal Reserve may need to raise interest rates again this year.

New York Federal Reserve President John Williams' comments came as he reaffirmed his view that the US Federal Reserve may need to raise interest rates again this year.

New York Federal Reserve President John Williams said the supply of AI equipment could take more than two years to catch up with demand, which could add to inflationary pressures.

Williams made the comments in an interview with Bloomberg on Tuesday, saying that building AI infrastructure will drive up the price of chips and the goods that use them.

Asked whether supply and demand in AI will become more balanced over the next two years, Williams said: "I think it will take longer. Assuming the kind of demand momentum continues as expected, and that's a big assumption."

William's comments came as he reiterated his view that the US Federal Reserve may need to raise interest rates once more this year as it seeks to reduce inflation.

However, Williams said "we'll have to see" about 2027, adding, "I don't think I have any reason to believe right now that we need to do more."

Meanwhile, Williams said he expects AI investment to remain strong even with higher rates.

"I think investors out there are relatively price insensitive," he said. "They feel it's a big achievement that's going to lead to productivity gains, huge transformative changes in our economy, and I think that's not going to be quite consistent with interest rates, but I don't expect monetary policy to really have a profound effect on that."

A shortage of AI equipment could have an impact on the expansion of Bitcoin miners into the sector as they compete for chips and power equipment.

IREN signed $2.8 billion in new AI cloud contracts in July, while Cointelegraph reported on Monday that miners pursuing AI projects now face significant financing needs and increasingly selective lenders.