Will tech giants Google, Amazon, OpenAI, Microsoft, Alphabet suffer as tariff war threatens U.S. AI boom? How will it benefit India?

Will Donald Trump's policy of reciprocal tariffs and the subsequent trade war hurt the US firms working in the field of artificial intelligence? Will tech giants like Google, Amazon, Microsoft, and NVIDIA and startups like OpenAI, Anthropic, and Cohere suffer the onslaught of the whims of the US President? The stocks of these firms have already nosedived (Microsoft -2.4%, Amazon -9%, Alphabet -4%). Not only the share prices of the companies plummet on the stock market, but their business is supposed to falter with chips and other components, necessary for the maintenance of the infrastructure of the datacentres and the training of the AI, will become more expensive. 

Will US tech giants suffer?

With imports from China (145%), Taiwan (32%), and South Korea (25%) attracting massive tariffs, the tech companies dealing with AI are most likely to suffer most. As the US tech companies heavily depend on these Asian countries for hardware, like the Graphic Processing Units or the GPUs, servers, and cooling systems, their input costs will soar. It can be understood by one example, a $1 million server could now cost $2.45 million if imported from China.

AI raw materials to cost more?

Raw materials for making the datacenters like steel, aluminium and copper could attract at least 25% tariff imported from anywhere, forget about China, pushing the cost. This can delay ambitious projects like the $500 billion Stargate data centre venture involving OpenAI, SoftBank, and Oracle. 

Reciprocal tariff to disrupt supply chain?

As the global supply chain is most likely to be disrupted by the tariff war, and most of the data processing machines, valued at $200 billion, are coming from Mexico, Taiwan, China, and Vietnam, it is sure to upset the AI applecart. As Beijing has slapped the US with retaliatory tariff as high as 125% and put a blanket ban on the export of rare earth minerals like lithium, necessary for manufacturing chips, the US tech giants will come under additional burden. 

Microsoft, Amazon, Alphabet on receiving end?

The US tech giants like Microsoft, Amazon, and Alphabet, which provide cloud services powering AI, will be hit hard by the increased operational costs. The AI startups may have to suffer most because of the higher costs. Consequently, this may widen the gap between well-funded big companies and smaller players. 

Will increased tariff boost US manufacturing?

However, it can be argued that the increased tariffs may boost U.S. manufacturing. It can be understood by the fact that Intel’s Ohio chip facility and HPE’s Texas server plant are most likely to slash their reliance on foreign hardware. Similarly, Apple, TSMC, and Micron have also announced they will invest in US-based semiconductor production facilities. 

However, it can not be denied that the increased tariff is likely to weaken U.S. AI competitiveness with China as Beijing has kept its domestic AI ecosystem insulated from the outside. It has proved its prowess with the success of DeepSeek. 

How will tariff war impact Indian AI dream?

India may benefit in this scenario as the tech firms may diversify supply chains to mitigate tariff impacts. This shift can also boost innovation in AI models less dependent on specific hardware. New Delhi may also use the opportunity in the semiconductor industry, in which it has made forays recently. Though chips are partially exempt from tariffs, most are exported to the US in tariffed products like servers.