Is AI revolution under threat from tariffs?

Investing.com -- The breakneck acceleration of artificial intelligence investment by Corporate America is facing a significant roadblock, a global trade war ignited by the U.S. under President Donald Trump.

While AI spending remains a long-term strategic priority for tech giants and their clients, the resurgence of tariffs—particularly the latest wave targeting Chinese goods—risks disrupting the supply chains that underpin this multi-billion-dollar transformation.

The impact of these tariffs could become more evident in the coming weeks as companies like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN) report quarterly results. Analysts will be watching for signs that trade tensions are beginning to affect their infrastructure spending and, by extension, the broader AI push.

Utilities such as Vistra Energy Corp (NYSE:VST) and Constellation Energy (NASDAQ:CEG), whose data centers support AI workloads, also face uncertainty as clients delay or scale back commitments.

Both Alphabet and Microsoft have reaffirmed their capital expenditure plans for the year—totaling $155 billion combined—but that hasn’t quelled concerns.

A rollback of exemptions on electronics could sharply raise data center costs, analysts warn, with one of the biggest risks being supply disruptions out of China, a key manufacturing hub for AI hardware.

“Much of the electrical infrastructure and data center equipment is manufactured outside of the U.S. In many cases this equipment is in short supply and demand is high globally,” said Pat Lynch, executive managing director at CBRE (NYSE:CBRE).

“Tariffs will likely make this more challenging, especially if foreign suppliers divert this equipment to other markets.”

Recent market performance reflects growing investor caution. The “Magnificent Seven”—which include Alphabet, Microsoft, Nvidia (NASDAQ:NVDA), and Amazon—have lost around $5 trillion in market value since peaking late last year.

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Nvidia, once the world’s most valuable company, is down 26% in 2025. Alphabet has lost 20%.

Early signs of a slowdown in infrastructure growth are beginning to emerge. Microsoft has reportedly pulled back from projects totaling 2 gigawatts of electricity capacity in the U.S. and Europe, according to TD Cowen.

A senior Microsoft executive confirmed the company is slowing or pausing some early-stage projects to remain flexible.

“Planning is a multi-year and capital-intensive program … any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers,” Noelle Walsh, President at Microsoft Cloud Operations + Innovation, said in a LinkedIn post earlier this month.

Amazon has also delayed some new data center leases, which the company attributed to routine capacity management.

"It does appear like the hyperscalers (big cloud firms) are being more discerning with leasing large clusters of power," Wells Fargo analysts said in a recent note.

Despite these headwinds, some investors remain bullish. “The market has massively discounted the near-term spending for AI and it is wrong,” said Eric Schiffer, CEO of Patriarch Organization.

“The large tech players cannot afford to lose the AI race,” he emphasized, adding that hyperscalers could see more significant returns in one year to 18 months.

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