President Donald Trump's new reciprocal tariffs could undermine the billion-dollar AI infrastructure projects being spearheaded by leading tech companies, analysts warn.
What Happened: On Thursday, analysts highlighted the negative impact of the Trump administration's tariffs on technology equipment, which were levied at 34% on China, 32% on Taiwan, and 25% on South Korea, while also imposing a 10% baseline tariff on all imports to the U.S., reported Reuters.
The tariffs threaten to raise the costs of essential hardware used in artificial intelligence infrastructure, such as data centers, servers, and chips.
“Capital expenditure by tech giants will get reshuffled,” said Abhishek Singh, partner at Everest Group. “Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts.”
The tariffs are expected to increase the cost of building data centers in the U.S., potentially delaying large-scale AI projects.
D.A. Davidson analyst Gil Luria pointed out that companies like Microsoft Corporation MSFT and Amazon.com, Inc. AMZN have already begun to scale back their data center investments due to financial uncertainty.
“Microsoft has already started articulating a more balanced, cautious approach to their data center build-out,” Luria noted.
The most high-profile project affected is the $500 billion Stargate venture between Oracle Corp ORCL, SoftBank Group SFTBF SFTBY, and OpenAI, aimed at building 20 data centers across the U.S.
“Stargate was already unlikely to get to that scale even before these things happened. Given the shock to the economy that these tariffs represent, it is highly unlikely that such a risky endeavor will be able to raise anywhere near that number in terms of debt financings,” stated Luria.
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Why It Matters: President Trump’s sweeping new trade tariffs jolted global markets on Thursday, sparking a dramatic sell-off reminiscent of the pandemic-era crashes.
Wall Street witnessed a staggering $2 trillion wiped from market value, with the 10 largest U.S. companies alone accounting for $1 trillion of those losses.
Apple Inc. AAPL plunged 9.25%, Nvidia Corp. NVDA fell 7.81%, Amazon.com Inc. AMZN dropped 8.98%, and Advanced Micro Devices Inc. AMD slid 8.9%.
Tesla Inc. TSLA declined 5.47%, while Meta Platforms Inc. META lost 8.96%. Alphabet Inc.'s Class A shares GOOGL dipped 4.02%, and Class C shares GOOG were down 3.92%, according to data from Benzinga Pro.
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