Lexicon Financial Group Weekly Update — August 12, 2026
“In the middle of every difficulty lies opportunity.”
ISSUE 240
Looking Around
Wayne’s Economics 101 lecturer at the University of Cape Town said something that has stuck with him ever since, namely, “There ain’t no such thing as a free lunch” (or TANSTAAFL). Even when something looks completely free, it always has a hidden cost, a catch, or a trade-off. And that price has to be paid.
For example, AI may look free to use, but it is not. It has hidden costs—some might refer to them as externalities. Google unveiled its Pixel 11 smartphone lineup this week and raised starting prices by US$100. Apple also recently announced that it is raising its prices on MacBooks and iPads with the potential for more price hikes down the road.
The increase in price can be directly traced to the surging demand by artificial intelligence and the use of data centres. Increased demand for memory storage has led to higher prices for smartphones and laptops. According to Ranjit Atwal, a senior director analyst at Gartner, these memory cost hikes are expected to reduce global personal computer shipments by 10.4 per cent and smartphone shipments by 8.4 per cent in 2026. Atwal contends that these prices may remain high until the end of 2027. And these higher prices are an externality—the indirect, unintended costs or benefits that AI development and deployment have imposed, even on those who aren’t using the services. (1)
There are other externalities, of course. According to a new study from UN University (UNU), AI-related water consumption could equal the basic annual domestic needs of 1.3 billion people by the end of this decade, while its land footprint may exceed 14,500 square kilometres. This study also found that the day-to-day usage of AI accounts for roughly 80 to 90 per cent of total AI energy needs. In fact, one widely used AI service is estimated to process around 2.5 billion prompts per day, consuming hundreds of gigawatt-hours of electricity each year. Energy use also varies widely depending on the task. Generating a single AI image can require more than a thousand times the energy of simple text classification, while video generation demands even greater resources. And then there is the burgeoning electronic waste (expected to be up to 2.5 million tons annually by 2030) generated by AI. (2)
To put that into context, if instead of data centres, those 14,500 square kilometres were used for food production or housing, our world would look a lot different. It’s not a judgement on AI…merely an observation.
But even if there is no free lunch, there are still plenty of opportunities. Some AI applications can support solutions for climate change, biodiversity loss, efficient use of energy and water, etc. These solutions could include:
Reusing water consumed in data centres as well as alternate sources other than fresh drinking water such as treated wastewater.
Recycling materials from processors and old lithium batteries in or around data centres to help reduce electronic waste.
Using clean energy rather than fossil fuels to power data centres. (3)
Given the right amount of investment and government support, these solutions could help reduce the externalities of AI over time. A well-equipped clean energy solution to power AI could be expanded to power a nearby community, for example. AI is not a free lunch, but its opportunities may be. Our entrepreneurs and decision-makers just need to be clever enough to find them.
Read and Watch
Want deeper insight into topics in your Weekly Update? Then, read and/or right click:
Canada's economy gains 75,000 new jobs, driving down unemployment rate
Fed's Warsh gets a break as inflation eases
Euro zone investor morale turns positive in August, Sentix survey shows
The Guardian view on Japan’s yen: Trump wants to keep the easy-money machine running
Beijing says 20% offshore insurance tax not new – and does not target Hong Kong
Looking Back
The Toronto Stock Exchange's S&P/TSX Composite index (TSX), Canada's main stock index, rose to another record high last Friday, led by mining and real estate shares. For the week, the index added 3.3 per cent—its biggest weekly advance in four months. A surprise decline in employment in the United States (U.S.) last month cast doubt on a September interest rate hike by the Federal Reserve also provided a boost to the TSX.
Canada's jobs report was more upbeat, with employment jumping by 75,100 positions and the jobless rate falling for the third consecutive month. This data did not alter expectations for the Bank of Canada to leave its benchmark interest rate on hold at 2.25 per cent in September. (4)
Generally favourable U.S. company earnings, renewed enthusiasm around artificial intelligence (AI)-related stocks, and optimism about the potential reopening of the Strait of Hormuz supported investor sentiment and led to major U.S. stock indexes advancing last week. The technology-heavy Nasdaq Composite led the way, followed by the S&P 500 and the Dow Jones Industrial Average. U.S. Treasuries generated positive returns for the week, as declining oil prices and softer employment data helped drive yields lower across most maturities.
The Bureau of Labor Statistics (BLS) reported that U.S. employers shed 23,000 jobs in July. This was well below estimates for an increase of around 80,000 and the weakest reading since February. Prior months were also revised lower: June’s gain was cut to 20,000 from 57,000, while May’s reading was revised to 63,000 from 129,000. The probability of a September interest rate hike fell to around 42 per cent from roughly 55 per cent, according to the CME FedWatch Tool.
European equities were supported by firmer risk appetite and resilient earnings, although the geopolitical backdrop remained volatile. Hopes for a framework to reopen the Strait of Hormuz pushed crude lower and supported cyclicals early in the week, before renewed uncertainty around shipping terms lifted energy risk into Friday. The pan-European STOXX Europe 600 Index ended the week up 1.70 per cent in local currency terms, while all the other major European indexes also ended the week in positive territory.
Japan’s stock markets moved up last week, as investors assessed the impact of the prior week’s currency interventions to support the yen, while speculation continued over the timing of the Bank of Japan’s (BoJ’s) next rate hike. Japanese authorities had initially acted on their own to support the yen, before subsequently coordinating with the U.S. to lift the currency from 40-year lows. The coordinated action—the first joint U.S.-Japan foreign exchange intervention in 15 years—saw Japanese authorities buy yen and sell U.S. dollars, while U.S. authorities supported the yen by purchasing it against the euro. The Japanese government advanced its consumption tax cut plan through Cabinet, raising fiscal concerns, while economic data suggested that improving household incomes have yet to translate into stronger consumption.
Stock indexes in mainland China diverged last week, with resilient performance from mainland benchmarks contrasting with weakness in Hong Kong markets. Renewed strength from technology and semiconductor-related shares supported mainland markets’ gains, while weakness from financial names dragged on Hong Kong amid news that Chinese tax authorities are levying taxes on offshore insurance policies. (5)
Google raises Pixel prices by $100 as memory costs climb, Jaiveer Shekhawat, Investing.com via Yahoo!Tech, August 12, 2026
AI’s environmental costs threaten water, land and climate, United Nations News, June 4, 2026
Artificial Intelligence and the Environment, Sustainability in the Digital Age and Future Earth Canada, September 5, 2024
TSX posts biggest weekly gain in four months as Fed rate-hike bets ebb, Sudeshna Ghoshal and Fergal Smith, Reuters, August 7, 2026
Global markets weekly update - U.S. economy loses jobs in July, T. Rowe Price, August 2026
The opinions expressed are those of Craig Swistun and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable, but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors, and we recommend that clients seek independent advice from a professional advisor on tax-related matters.
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Looking to Learn?
If you want to know more about some of the topics we wrote about this week, just click on the links below:
TANSTAAFL Explained: Hidden Costs Within "Free" Offers
Understanding Externalities: Positive and Negative Economic Impacts
AI has an environmental problem. Here’s what the world can do about that.
