Global: AI Boom Hedges Against the Impact of Soaring Energy Prices

■ Despite initial concerns about stagflation due to soaring energy prices, there are currently no clear signs of it, and the global economy is gradually recovering.  
■ In East Asia, which is highly dependent on Middle Eastern energy, AI-related demand has become an important buffer against downward economic pressure. 
 
Since March, energy prices such as crude oil and natural gas have risen sharply. Coupled with the prolonged blockade of the Strait of Hormuz, the market was once worried that the global economy would fall into a state of "stagflation," where economic activity stagnates and prices rise simultaneously. From an inflation perspective, this trend has begun to be reflected in inter-firm transactions and is expected to be transmitted to consumer prices gradually. In contrast, regarding economic stagnation, although domestic economic activity in some countries and regions such as China and Germany has slowed down, most countries and regions have not experienced a significant decline. On the contrary, economic conditions have improved compared to March and are showing a gradual recovery trend. 
 
Similar to the situation after the US implemented "reciprocal tariffs" last year, companies have stocked up in advance and increased inventory demand to cope with rising prices and the risk of disruption to international supply chains, which is one of the reasons for the resilience of global economic activity. However, the primary driving factor is the rapid expansion of investment demand for artificial intelligence (AI) related equipment, such as semiconductors, which is clearly reflected in the export and order data of East Asian countries. Driven by the continued construction of data centers and expansion of storage capacity by large cloud computing companies known as "hyperscalers," US capital goods orders have accelerated significantly since the second half of last year. Although this includes price increases, non-defense capital goods orders excluding aircraft (May: $84.027 billion) still hit a record high. Meanwhile, driven by demand for high-speed, high-capacity memory required for data center construction, South Korea's semiconductor exports (May: 167.7% year-on-year increase), Taiwan's information and communication equipment export orders (May: 74.4% year-on-year increase), and China's integrated circuit (IC) exports (May: 110.9% year-on-year increase) all saw substantial year-on-year growth, with exports to the US, China, and Hong Kong showing particularly strong increases. In Japan, increased production of semiconductor manufacturing equipment and electronic components has fueled a continued expansion in demand for precision machining machinery, driving rapid growth in machine tool orders (May: up 137.4% year-on-year) and overseas demand for machinery (April: up 64.1% year-on-year). As for inventory demand, being "pre-emptive," it may rebound and decline in the future as oil price increases slow. AI-related demand, however, has a lower correlation with the Middle East situation and international commodity market trends. Based on sales forecasts from relevant companies, it is expected to remain strong for some time. 
 
For East Asian countries heavily reliant on Middle Eastern energy, AI-related demand has been a crucial buffer against economic adjustment pressures since March. Meanwhile, the wealth effect from the significant rise in semiconductor-related stocks and increased revenue in related industries is expected to further boost consumer spending. However, the growth dividends from AI-related industries are mainly concentrated among middle- and high-income groups with substantial financial assets and those working in the semiconductor industry. For families whose real income has shrunk due to rising prices, the benefits are relatively limited, which may further widen the income gap between different groups.