Currys warns costs might rise as AI growth pushes up chip prices

The boss of Currys has warned that prices could rise as the Artificial Intelligence (AI) boom pushes up chip costs.

The electricals retailer’s chief executive Alex Baldock said he was ‘quite concerned’ over the threat of chip shortages amid fears that the AI surge represents a bubble set to burst.

Shoppers could see prices rise on tech products that require chips for memory, including laptops, tablets and phones.

And Baldock warned war in the Middle East could also spell higher inflation and weaker consumer demand in the UK.

Speaking about potential chip shortages at an investor day in Reading, Baldock said: ‘It is something we are quite concerned about.

‘AI is hoovering up the supply of memory and that means there is less for the stuff that we sell, and that’s the reality at the moment.’

Mobiles and computer products were big sellers at the business over Christmas, its peak trading period.

Baldock said the group has a sufficient pipeline of all products until ‘back to school this year’, but it ‘might have to see some price inflation’ because of competition in the market.

The group, which has 300 shops in the UK, insisted it was front of the queue with suppliers as it is the UK’s largest electronic retailer.

Baldock also sounded the alarm over the possibility of the war in the Middle East hindering a recovery on consumer confidence.

‘War and spiky energy prices feeding through into higher inflation and lower consumer purchasing power isn’t great for consumer confidence and spending,’ Baldock said.

He said the knock-on impact on consumer spending was the ‘biggest risk’ posed to his business by the war, which started at the end of February.

Energy bills could increase by £160 a year to £1,800 per household from July, according to a prediction from energy experts Cornwall Insight.

Curry’s is well protected from any direct supply chain disruption as it ships very few products from that area, the group said.

Harvir Dhillon, economist at the British Retail Consortium, said: ‘The significant rise in AI data centres has increased global demand for semiconductor memory. This is pushing up manufacturing costs for consumer products that use these chips, such as laptops, video games consoles, and other consumer electronics.’

The concerns follow a worldwide chip shortage following the pandemic, which led to major price increases and delays for chips used for everything from cars to video game consoles.

There have also been warnings that the surge in share prices for major AI players – including Nvidia and Microsoft – has been overdone and is driven by hype.

Russ Mould, investment director at AJ Bell, said a ‘spending binge’ among major tech giants was ‘stoking fears that malinvestment will, at some stage, lead to a major bust, but in the short term there could be other unintended consequences, too.’

He said that makers of key memory silicon chips – including SK Hynix and Samsung Electronics – have flagged high demand.

‘A supply crunch usually means higher input costs and crimped production volumes for the makers of the end products, such as laptops, smartphones and other consumer gadgets,’ he added.