If you follow tech stocks, there's probably one thing on your mind today: Donald Trump's tariffs.
Yesterday, Trump announced his long-teased "reciprocal tariffs" on foreign imports coming into the US. Among them are a 32 percent tariff on Taiwan, 24 percent on Japan, 26 percent on India, and 34 percent on China — all major players in the global tech trade.
As a result, the magnificent seven (M7) stocks — a stock trader term for the current whales of the tech industry: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — are in a freefall today, as investors sell off their shares to brace for economic uncertainty. Among the tech industry, the stagnant AI sector is being hit particularly hard, as energy costs are anticipated to skyrocket along with the cost of important resources like steel, precious minerals, and semiconductors.
As such, the cost to build and run data centers, the massive facilities that make AI computing possible, is expected to spike as the supply chain adjusts to the new normal.
The vast majority of chips that power these data centers come from hard-hit countries like Taiwan, Thailand, Japan, and Vietnam, while the US makes just 11 percent of its chips at home. 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.
That's a crushing blow for American AI companies, which were already facing the consequences of investor skepticism, lagging revenue, and a disappointing debut AI IPO by CoreWeave.
Broader details about how these tariffs will affect the tech industry are foggy right now, as the stock market is moving at a breakneck pace, but there is one common theme: everything is down. Apple, for example, is heading for its biggest single-day plunge in stock price in nearly 5 years, dropping over 8 percent in just the first few hours of trading. Other M7 stocks are likewise plummeting, with Amazon down almost 9 percent, and Nvidia down by 6.7 at the time of writing. Tesla has continued its months-long cascade with a 7 percent dip so far.
If you're wondering why we're doing this, you're not alone. For decades, the United States has sat atop the global economic food chain. Thanks to years of military and economic supremacy, the US dollar became the world standard, making it easy to export cheap consumer goods as high-paying American jobs became starvation industries in countries dependent on US trade.
Trump's tariffs seem to be an attempt to reverse all that — an economic experiment that's never really been attempted at this scale. The entire move hinges on the bet that companies will shift production from places like Vietnam and Taiwan back into the US, a gamble which business leaders say comes with high costs and even higher risks.
As Trump's tariffs aren't enshrined in law, they could be easily undone by the courts or the next presidential administration, making a long-term investment into, say, a $5 billion semiconductor plant on US soil hard to justify from a business standpoint — and at the end of the day, isn't what this is all about?
More on the AI economy: AI Hype Will Plunge America Into Financial Ruin, Economist Warns
The post Trump's Tariffs Are a Bruising Defeat for the AI Industry appeared first on Futurism.
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Trump's Tariffs Are a Bruising Defeat for the AI Industry
