US PRESIDENT Donald Trump’s sweeping reciprocal tariffs could hamstring Big Tech’s billion-dollar efforts to build artificial intelligence infrastructure in the country, likely undermining a key goal of the administration, analysts said on Thursday.
Trump and technology executives have touted lofty plans by Oracle, SoftBank and others to invest heavily in artificial intelligence since his return to the White House earlier this year.
On Wednesday, Trump slapped steep duties on leading technology equipment suppliers including 34 per cent on China, 32 per cent on Taiwan and 25 per cent on South Korea, while imposing a 10 per cent baseline tariff on all imports to the US.
Electronics – which include smartphones, PCs and data-centre equipment – were the second biggest imports last year at nearly US$486 billion worth of goods, according to Census Bureau data.
Bernstein analysts pegged data processing machine imports at about US$200 billion in 2024, mostly from Mexico, Taiwan, China and Vietnam.
“Capital expenditure by tech giants will get reshuffled: Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts,” said Abhishek Singh, partner at research firm Everest Group.
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While semiconductors were exempted from Wednesday’s tariffs, the US is planning targeted tariffs for chips that could come later, a White House official said.
AMD said it is “assessing the details and any impacts on our broader customer and partner ecosystem.”
Intel, Nvidia and Taiwan Semiconductor Manufacturing Co. declined to comment. Broadcom did not respond to a request for comment.
Shares of Nvidia, AMD and Broadcom closed down between 7 per cent and 10 per cent and US-listed shares of TSMC ended 7.6 per cent lower on Thursday. Intel closed up 2.1 per cent after a report of the company’s preliminary joint venture agreement with TSMC.
“There’s no doubt that the equipment that goes into data centres will become significantly more expensive … Microsoft has already started articulating a more balanced, cautious approach to their data centre build-out, and to some extent Amazon as well,” said D.A. Davidson analyst Gil Luria.
Analysts said data center building costs will rise, although the extent of the impact is not yet clear. The key is how the AI hardware is classified, according to Dylan Patel, founder of industry research firm SemiAnalysis.
The Trump administration could exempt semiconductors but not the circuit board assemblies they are sold with, which would mean they would be affected by the Taiwan tariffs, Patel added. But if the hardware assemblies are also exempt, costs might not increase much.
Dark clouds
The increased costs could delay data-centre expansion and AI adoption, setting back ambitious plans such as Stargate, the US$500 billion data-centre venture between ChatGPT maker OpenAI, SoftBank Group and Oracle.
Trump announced Stargate earlier this year, with a goal to outpace rival nations in AI development. The project would span construction of 20 data centres in the United States.
“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,” Luria said.
The tariffs are also a new threat to the top cloud service providers such as Microsoft, Alphabet and Amazon.com, already facing skepticism from investors over their steep AI budgets.
On Thursday, shares of Microsoft closed down 2.4 per cent, while those of Amazon and Alphabet ended lower around 9 per cent and 4 per cent respectively.
Microsoft declined to comment, while Amazon and Alphabet did not immediately respond to requests for comment.
TD Cowen analysts recently said Microsoft had abandoned data-centre projects set to use 2 gigawatts of electricity in the US and Europe in the last six months due to an oversupply relative to current demand.
Brokerage HSBC on Thursday also warned of a potential slowdown in spending at cloud companies next year, and cut its price target on Nvidia, the biggest winner in the AI race over the last couple of years.
“The tariffs are likely to create demand destruction, which means cutbacks on software and cloud spending. Alphabet will see a double whammy with digital advertising also cut back in a tougher economic environment – with Meta also hit,” said Ben Barringer, global technology analyst at Quilter Cheviot. REUTERS
