By Aditya Soni
(Reuters) – Corporate America’s artificial intelligence investment frenzy has shrugged off fears of slow returns and doubts fueled by AI models built cheaply by China’s DeepSeek. But a global trade war started by the Trump administration threatens to stall the boom across industries from energy to software.
Upcoming earnings reports from tech giants including Alphabet and Microsoft, as well as utilities that power massive data centers such as Vistra and Constellation Energy, will show whether tit-for-tat tariffs between the U.S. and China are forcing businesses to rethink their ambitious infrastructure plans.
Their clients, which range from retailers and media houses to airlines and automakers, are slowing spending amid the uncertainty. Analysts said this could hit investments in AI tools and pointed to early signs of tech giants pulling back on data center leases.
Pre-emptively, both Alphabet’s Google and Microsoft have reaffirmed their capital expense plans for the year that together total $155 billion – nearly half the roughly $320 billion analysts estimate Big Tech will pour into AI this year.
However, the pressure is mounting on tech companies as tariffs disrupt supply chains, especially in China. The world’s No. 2 economy is crucial to the production of AI hardware and was excluded from a 90-day tariff reprieve earlier this month.
Analysts say the 145% U.S. tariffs on Chinese goods will sharply increase data center costs if an exemption on electronics is rolled back.
“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 for data center solutions at CBRE, a commercial real estate services firm. “Tariffs will likely make this more challenging, especially if foreign suppliers divert this equipment to other markets.”
A pullback in AI spending has big implications for the U.S. economy.
J.P. Morgan analysts estimated in January that spending on data centers could contribute between 10 and 20 basis points to the country’s economic growth in 2025-2026.
Some of the concern is already baked into shares of the “Magnificent Seven” – a group of high-flying stocks that have powered the market in recent years but have lost around $5 trillion in market value since hitting a peak late last year.
AI chip giant Nvidia, whose blistering stock rally over the past two years briefly turned it into the world’s most valuable firm, is down about 26% this year. Alphabet stock has lost about 20% of its value.
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