Will Mounting Supply Chain Strains Hamstring the AI Investment Boom?
Will Mounting Supply Chain Strains Hamstring the AI Investment Boom?
Publish Date: 2026-05-11 07:03:00
Source Domain: libertystreeteconomics.newyorkfed.org
The conflict in the Middle East has precipitated a global supply shock—the third in six years following the pandemic in 2020 and Russia’s invasion of Ukraine in 2022. The current shock raises the specter of spillovers to the U.S. through both prices and physical shortages of goods. A critical conduit for spillovers through these channels is via Asian supply chains, especially from middle- to lower-middle income countries in southeast Asia, which are key suppliers for goods needed for the AI infrastructure build-out in the U.S. These countries are also heavily reliant on Middle East energy imports. This post examines key factors related to these Asian supply chain vulnerabilities.
How Large Are Supply Strains Thus Far?
The Middle East conflict has caused the virtual closure of the Strait of Hormuz (SOH). While the closure has had major implications for global energy markets—prior to the onset of hostilities, shipments through the SOH account for approximately one-fifth of global crude oil and a quarter of liquified natural gas (LNG) exports—the effects on global supply chains are much broader. This is illustrated in the chart below of the New York Fed’s Global Supply Chain Pressure Index (GSCPI). Over the two months since the conflict began, the index rose by 1.3 points, to 1.8 standard deviations above its average value.
The GSCPI extracts the supply signal from survey data on manufacturing industry delivery times, order backlogs, and inventory stocks as well as shipping costs for ocean and airfreight. The index had been gradually climbing even before the conflict began, likely in part reflecting strains from the boom in artificial intelligence investment. Within the GSCPI model, the increases in the index have been driven predominantly by lengthening delivery times and growing order backlogs.
Global Supply Chain Pressure Index
Source: Federal Reserve Bank of New…
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