Trump's Tariffs: Why AI Stocks Are Under Pressure

The technology sector is reeling from the latest round of tariffs imposed by President Donald Trump, with major AI stocks like Apple, Meta, and Alphabet feeling the heat. The new tariffs, which impose a baseline 10% duty on all imports with targeted nations facing rates as high as 50%, are set to disrupt global supply chains and escalate costs for semiconductor production, data center construction, and other critical components of the AI industry.



The tariffs, which Trump has dubbed "Liberation Day" measures, are part of a broader strategy aimed at bringing prosperity back to the US by imposing what he calls "reciprocal tariffs" on foreign imports. The administration's framework imposes baseline 10% duties on all imports, with targeted nations facing rates as high as 50%. The White House is calling it 'Liberation Day' measures.

The technology sector, particularly dependent on intricate global manufacturing networks stretching across Asia, finds itself at the epicentre of these trade disruptions. Semiconductor production, where Taiwan holds a dominant position in advanced chip manufacturing, is the heart of the technology sector — and now has become a focal point of geopolitical strategy as nations compete for technological self-sufficiency.

The tariffs are expected to have a significant impact on the supply chains of major AI stocks. For instance, Apple, which saw its stock slip more than 6% following Trump's announcement, is heavily dependent on manufacturing in China. The tariffs will increase the cost of importing components and finished products, which will ultimately be passed on to consumers. This disruption in the supply chain will strain Apple's operational costs and profitability, as the company will need to either absorb the increased costs or raise prices, potentially affecting consumer demand.

Similarly, Meta and Alphabet, which rely on data centers for their AI operations, will face increased costs due to the tariffs. The vast majority of chips that power these data centers come from hard-hit countries like Taiwan, Thailand, Japan, and Vietnam. Trump's tariffs will force countries from those companies to hike their chip prices, and US companies will no doubt hike their prices to compensate, which will ultimately run off to consumers. This will increase the cost to build and run data centers, the massive facilities that make AI computing possible, and will strain the operational costs and profitability of these companies.

In the long term, these tariffs could lead to a reshuffling of global supply chains, as companies may be forced to relocate production facilities from China to the US. For example, TSMC plans to invest an additional US$100bn in US operations, expanding its manufacturing presence to increase domestic production and reduce dependency on foreign supply chains. This shift could potentially reduce the impact of tariffs in the future but will come at a high cost and with significant risks.

The tariffs have already led to significant market volatility. For instance, Nvidia saw its stock drop 4.7%, AMD fell 4.5%, Broadcom dipped 5.2%, while Micron dropped 6.4%. Apple saw its stock slip more than 6% along with Amazon, which relies heavily on manufacturing in China and will feel the impact of the additional levies.



The tariffs are part of a broader geopolitical strategy aimed at technological self-sufficiency. This could lead to further protectionism and uncertainty, as noted by European Commission President Ursula von der Leyen: “Uncertainty will spiral and trigger the rise of further protectionism. The consequences will be dire for millions of people around the globe.”

In response, tech giants might need to diversify their supply chains and production facilities across multiple countries to mitigate geopolitical risks. For example, TSMC’s investment in the US is a strategic move to align with national security interests and reduce dependency on foreign supply chains.

Overall, the tariffs will increase the operational costs and strain the profitability of major AI stocks like Apple, Meta, and Alphabet in the short term, and could lead to a reshuffling of global supply chains in the long term.