Tech prices have spiked up to 50 per cent. AI is to blame

Tech prices have surged by up to 50 per cent, with artificial intelligence being cited as a key driver of the sharp increase. Consumers are increasingly restricting their spending on new technology as prices for laptops, computers, smartphones, and gaming devices continue to climb. Some brands have seen price hikes exceeding 50 per cent, creating a ripple effect across the supply chain and impacting both retailers and end-users. The surge in demand for AI-powered infrastructure has led major semiconductor manufacturers and global foundries to shift production capacity away from consumer electronics toward enterprise AI servers and data centres. This strategic pivot has created severe shortages of essential components for consumer technology, resulting in a contraction of the global supply of devices. As a consequence, wholesale prices have risen sharply, translating into higher costs for end users and reduced profit margins for tech retailers. Retailers like JB Hi-Fi have reported a noticeable slowdown in sales momentum, particularly in the fourth quarter. The company attributed this decline to supplier price rises and stock availability shortages, compounded by broader macroeconomic and market challenges in the technology sector. In response, JB Hi-Fi has been forced to aggressively reduce prices at the point of sale to maintain sales volume, leading to a drop in gross margins by 25 basis points in the second half of the year to 21.93 per cent. Shares in JB Hi-Fi plummeted by 11.9 per cent following the release of these figures, reflecting investor concerns over the company's ability to sustain sales amid ongoing supply constraints. Analysts suggest that the company's struggles are indicative of wider issues affecting the electronics retail sector. According to eToro analyst Josh Gilbert, the weak performance in July, lacking major promotional events such as Black Friday or Boxing Day, is likely to dampen sentiment across the sector. He notes that while JB Hi-Fi has demonstrated its ability to drive sales when products are available, the challenge now lies in ensuring consistent supply. During an investor call, JB Hi-Fi CEO Nick Wells highlighted that rising wholesale prices, combined with limited support from manufacturers for promotional activities, have caused consumers to delay discretionary purchases until major sales events. This trend has intensified as supply chain disruptions persist, with July lacking the usual impetus for large-scale buying. MST Marquee analyst Craig Woolford predicts that the slowdown in sales is likely to worsen in the December 2026 quarter, though he acknowledges that JB Hi-Fi is not alone in facing these challenges. The impact of AI-driven demand extends beyond consumer electronics. Supply chain constraints linked to the global AI buildout are expected to last for at least 12 to 18 months, as silicon foundries remain fully booked by AI-focused enterprises. Even major tech firms like Apple are experiencing delays, with reports suggesting that only select iPhone 18 models will be available this year, while others are postponed to 2027. Meanwhile, the AI disruption is also reshaping the landscape for software companies. Sydney-based design platform Canva has announced a significant reduction in its internal valuation, marking a loss of over $10 billion. The company now values itself at $43.9 billion, down from $53.9 billion just one year prior. This adjustment comes as Canva faces mounting pressure from the rapid adoption of AI tools that threaten to undermine its core business. Competitors like Adobe and HubSpot have also seen substantial declines in value, with Figma losing nearly two-thirds of its market capitalisation since its public listing. Canva’s leadership attributes the valuation cut to both internal performance and broader market conditions. The company claims that the decline is partly due to a weakening in user engagement, with monthly active users dropping slightly below 208 million during the first week of August, a historically weak period for the platform. However, the company argues that the downward trend in valuation would have occurred even without the recent revenue slowdown, as AI-driven competition continues to reshape expectations for digital design tools. To counter the AI threat, Canva has positioned itself as an AI-first company, having acquired several AI startups and developed its own design model. The company asserts that it has managed to reduce the cost of delivering AI-powered services by 90 per cent. Co-founder Cliff Obrecht emphasized that the company is committed to long-term innovation, stating that its private status allows it greater flexibility to pursue ambitious strategies without the immediate pressures of quarterly reporting. Blackbird Ventures, Canva’s primary backer, has also adjusted its valuation of the company to $49.5 billion, aligning with the latest internal assessment. Partner Rick Baker affirmed that the revised valuation follows Canva’s recent performance and future outlook, underscoring confidence in the company’s long-term vision.