Will Tariffs Stall the Global Tech Rally? The Case for AI Leaders and the TACO Trade

The global equities bull market outside the U.S. faces a critical test: can it withstand escalating U.S. tariffs, or will trade wars derail the rally? While tariffs have sparked volatility, the Nasdaq-100's tech giants—particularly AI leaders like NVIDIA (NVDA) and Microsoft (MSFT)—are proving their resilience. Investors betting on the "TACO trade" (Trump Always Chickens Out) and the structural dominance of agentic AI firms argue that tariffs won't derail the tech boom. Here's why.

The TACO Trade: Why Tariffs Often Fail to Materialize

The Trump administration's tariff threats since 2025 have followed a familiar pattern: bold announcements, market sell-offs, then negotiated rollbacks or delays. Take the July 12 tariffs on the EU and Mexico, which were delayed until August 1 and face legal challenges. Courts have already struck down IEEPA-based tariffs (see June 3 ruling), forcing the White House to seek alternative measures. This creates a recurring cycle of "threat and retreat," dubbed the TACO trade by traders.

NVIDIA's stock, for example, fell 5% on July 12 tariff news but rebounded 8% by July 14. This pattern mirrors its response to prior tariff scares, highlighting investor confidence in its AI-driven growth. The TACO trade isn't just about U.S. politics—it's about markets pricing in tariff risks long before they're implemented.

The AI Advantage: Why Tech Giants Are Bulletproof

The Nasdaq-100's $12 trillion agentic AI market is the ultimate moat against tariff-driven volatility. NVIDIA's GPUs power 90% of AI training workloads, while Microsoft's Azure AI cloud infrastructure fuels enterprise adoption. These companies are not just tech stocks—they're critical infrastructure for the next wave of automation, healthcare, and finance.

Even if tariffs raise input costs, AI leaders have pricing power. NVIDIA's data center revenue (45% of sales) hit a record $10.1 billion in Q2 2025, up 67% year-over-year. Microsoft's Azure AI revenue grew 52% in the same period, outpacing macroeconomic headwinds.

Why the QQQ ETF Is the Bull Market's Secret Weapon

The Invesco QQQ ETF, tracking the Nasdaq-100, holds 37% of its weight in AI leaders like NVIDIA, Microsoft, and Alphabet. Historically, QQQ has thrived during tariff-induced volatility. During the July 2025 tariff scare, QQQ fell just 0.5%—a fraction of the broader market's 2% drop—thanks to AI stocks' momentum.

The ETF's structural bias toward AI winners gives it a unique edge. Even if tariffs slow global GDP, agentic AI's $12 trillion addressable market (projected by 2030) ensures demand for tech infrastructure remains insatiable.

The Counterarguments—and Why They're Overblown

Critics argue tariffs could disrupt semiconductor supply chains or Chinese AI partnerships. Yet NVIDIA already sources 70% of its chips from Taiwan and South Korea, outside the U.S.-China tariff crosshairs. Microsoft's Azure partnerships with Japan's SoftBank and India's Tata Group further diversify its supply chain.

Meanwhile, the TACO trade's track record is strong. The July 8 delay of EU tariffs and the CIT court's IEEPA ruling suggest that aggressive tariffs are often diluted or abandoned.

Investment Takeaways

1. Stay overweight Nasdaq-100 AI leaders: NVIDIA and Microsoft's dominance in critical AI segments makes them recession-resistant.
2. Use QQQ to capture momentum: Its exposure to AI stocks and historical resilience in volatility make it a better bet than broader indices.
3. Monitor TACO catalysts: The August 1 tariff deadline and the July 31 court ruling on IEEPA tariffs are key inflection points.

Final Verdict: Tariffs Can't Stop the Tech Bull

The global equities bull market outside the U.S. is far from over. While tariffs create noise, AI's transformative power—and the TACO trade's repeated victories—ensure that Nasdaq-100 leaders remain the market's engine. For investors, the path forward is clear: buy the dip in QQQ, and let AI's $12 trillion future do the rest.

This analysis does not constitute financial advice. Investors should conduct their own research or consult a financial advisor before making decisions.