WASHINGTON: The AI industry is bracing for a turbulent period after the announcement of sweeping new US tariffs by US President Donald Trump, with analysts warning of rising costs, supply chain disruptions, and a likely delay in major artificial intelligence infrastructure projects.
Speaking from the White House Rose Garden on 2 April, President Trump described the move as a “declaration of economic independence,” introducing baseline tariffs of 10% on all imports, with higher rates imposed on key trading partners — including a 54% tariff on China and 32% on Taiwan.
“This will be, indeed, the golden age of America,” Trump declared. “It’s coming back and we’re going to come back very strongly.”
While the administration’s fact sheet indicated semiconductors would be exempt from the initial round of tariffs, industry leaders say the measure lacks clarity and threatens to upend the fragile ecosystem underpinning AI development.
GPU tariff ambiguity sparks market jitters
A key area of confusion surrounds whether GPUs — the high-performance chips essential for machine learning and AI model training — will be fully exempt.
The White House has exempted semiconductor chips but not necessarily the full hardware units containing them, such as servers.
“Most AI GPUs are, I believe, imported not as chips but as servers, largely from Taiwan,” said Chris Miller, author of Chip War and professor at Tufts University, in comments to The Verge.
“So these would presumably face the general Taiwan tariff rate.”
The uncertainty has rattled markets. Nvidia shares fell 7.6%, while Taiwan Semiconductor Manufacturing Company (TSMC) dropped 7.2% following the announcement.
Other tech firms, including AMD and Broadcom, also experienced sharp declines, with Apple and Amazon losing over 6% each due to their heavy reliance on Chinese and Taiwanese manufacturing.
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Daniel Ives, an analyst at Wedbush Securities, described the tariffs as “worse than the worst case scenario” for tech investors.
“The industry will clearly be under major pressure… especially regarding the China and Taiwan piece,” he said.
Tariffs threaten AI infrastructure expansion
Analysts and executives fear the tariffs could derail AI infrastructure plans, such as Stargate, the $500 billion data centre venture involving OpenAI, SoftBank and Oracle, announced earlier this year.
“This will increase costs significantly,” said Gil Luria, an analyst at D.A. Davidson. “Microsoft and Amazon have already started taking a more cautious approach to data centre build-outs.”
In a note, Dylan Patel of SemiAnalysis warned that while chips may be exempt, the circuit board assemblies they are sold with may not be, depending on how hardware is classified under the new tariff regime.
The uncertainty could shift capital expenditure away from innovation and toward hedging against supply chain shocks.
“Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion,” said Abhishek Singh, a partner at Everest Group.
Europe and Asia criticise measures
Global leaders were quick to criticise the tariff policy. European Commission President Ursula von der Leyen called the move “a major blow to the world economy,” warning it would “trigger the rise of further protectionism.”
The EU faces a 20% tariff on exports to the US, while the UK is subject to the baseline 10% rate.
Taiwan, whose TSMC is the world’s largest advanced chip manufacturer, also objected to the 32% tariff rate.
TSMC CEO C.C. Wei reaffirmed the company’s commitment to the US market, having previously announced a $100 billion expansion plan to shift production to American soil.
Tech giants reassess investment plans
The financial strain is being felt across Silicon Valley. Microsoft, Alphabet (Google’s parent company), and Amazon — already under scrutiny for aggressive AI spending — all saw share price declines following the announcement.
Microsoft fell 2.4%, Alphabet 4%, and Amazon nearly 9%.
Brokerage HSBC warned of a slowdown in AI and cloud spending in 2025 and downgraded Nvidia’s stock price target.
Quilter Cheviot analyst Ben Barringer said, “The tariffs are likely to create demand destruction… Alphabet will see a double whammy, with digital advertising also cut back in a tougher economic environment.”
