For those firms looking to make a PC purchase today, they might be in for “sticker shock,” according to one builder of workplace computers.

“We’ve seen unbelievable price inflation, or chipflation, when it comes to these types of components that used to be relatively affordable and now, in the eyes of most people, they’re saying, ‘Whoa, I didn’t realize that it’s gone up so much,’” Kevin Jia, co-founder of Scarborough, Ont.-based Quoted Tech Computers, told TechNX in an interview.

“And so, it’s a bit of a sticker shock.”

More demand for data centres

The massive rise of artificial intelligence (AI) and the rush to build more data centres is largely behind the price rise, he explained.

“Chipflation to me is like an AI tax on everyday computing . . . these massive data centres coming in, they swallow all of the available component supplied, and so it puts a huge upwards pricing pressure on the available components for the rest of the market,” he said.

That means the prices of everything such as laptops, desktops and smart phones are rising dramatically.

Quoted Tech began business five years ago and has sold more than 15,000 computers, according to Jia.

But besides the rising prices, there is another trend that will keep purchasing managers up at night: spec shrinkflation.

This is because PC budgets aren’t keeping up with the rising prices, and therefore the specs, such as memory or chip capabilities, indicate less power than a higher-end model.

“How about we cut the specs instead, just so that we can make the budget work for you? So, what we’ve seen is we build systems with memory all the time, and I’ll give you an example here. Some memory kits like DDR5, that was available for about $100 Canadian in the past for 32 gigabytes (GB) is now something like $4, $5, $600,” Jia said.

Laptops that used to offer 32 GB of RAM and a one terabyte SSD drive are now regularly sold with smaller specs for a similar price: 16 GB and 512 GB drives, he said.

This is also having a great effect on PC builders such as Quoted Tech. “How do we hit the budget for people? How do we absorb some costs? How do we pass on some of that cost to the customer? But ultimately, customers have a limited budget. So that’s where the idea of spec shrinkflation comes from,” Jia said.

Minor price effects from 2025 tariffs

When certain tariffs were levied last year from the U.S., this may have added 15 to 30 per cent of a price rise.

“Let’s say an original component was $100, it might have added $30 of extra cost because of these issues, whereas the actual demand for data centres is the lion’s share of the demand, and the reason why the price is going up,” he said.

With this happening, the cost of some components is going up by as much as 10 times. “Even though it (tariffs) was a huge topic for Canadians a year ago . . . it’s relatively small now compared to what the data centres are demanding.”

While the bulk of the processors come from Taiwan and Vietnam, according to Jia, the market is also rising in the U.S.

Globally, the semiconductor market is huge: US$975 billion by the end of 2026, according to a report by Deloitte. Last year’s growth was 22 per cent, with an expected 26 per cent this year.

Even if this growth is muted, the overall market is expected to hit US$2 trillion by 2036, according to the Deloitte report. The U.S. growth is also expected to reach record levels of US$140 billion by 2030, according to another report by Gardner.

Chipflation is obviously going to hit smaller businesses more acutely, Jia said.

“Especially the businesses that don’t have procurement on IT, that cannot lock-in a one-year supply ahead of time; that don’t have a reserve of inventory ready to go, and they’re more or less just taking market price.”

As an example, if a business was given a quote for $10,000 12 months ago for equipment, today that would rise to $25,000. “Some of them are quite shocked when we tell them how much prices have increased,” he said.

For those who cannot wait, there is no sense trying to time the market, according to Jia. “My advice is that if you’re getting quoted a price today, you should probably just take it. You’re just going to have to bite the bullet.”

Silver lining for AI adopters

Amidst all this pricing bad news, firms might see those higher costs mitigated by the addition of AI tools.

“AI is driving so much additional productivity for the businesses that are actually using it: you can get so much more done now with a laptop or with a desktop. The businesses that are really dependent on this, they’re seeing massive, massive returns, even though the hardware is two, three, four times what the price used to cost,” Jia said.

“The reality is that the productivity gains are huge.”