The City woke to a jolt this morning as Apple’s latest price hikes on its custom processors sent shockwaves through London’s trading floors. The tech giant’s decision to raise the cost of its M-series chips by 15% has triggered a sell-off in consumer electronics stocks, with the FTSE 100 sliding 0.8% by midday.
For the British consumer, this is not merely a premium on faster laptops; it is a canary in the coal mine for inflation. The AI boom, which has driven demand for high-performance chips, is now spilling over into consumer goods. We have seen this script before: rising input costs, squeezed margins, and eventually higher prices on the high street.
The Bank of England’s Monetary Policy Committee will be watching closely. With core inflation stubbornly above 3%, any further pass-through to CPI could force Governor Bailey to rethink his cautious rate-cutting stance. Gilt yields have already risen 10 basis points on the news, as markets price in a higher probability of a hold in August.
The real worry is capital flight. If US tech giants can raise prices with impunity, the dollar will strengthen, and emerging markets will bleed. Britain, with its open capital account, is particularly exposed.
The pound has already slipped 1% against the greenback since the announcement. Meanwhile, the Treasury’s budget hawks are sharpening their pencils. Fiscal responsibility demands that we do not borrow to subsidise iPhone upgrades.
Let the market clear. If consumers want Apple’s latest kit, they will pay the price. But let us not pretend this is a temporary blip.
The AI revolution is a demand-side shock, and it is inflationary. The sooner policymakers acknowledge that, the better we can insulate British households from the worst of it.
