By Sabela Ojea
The global tariff war is likely to slow construction of data centers across the U.S. due to added costs, an outcome that may become an obstacle to the artificial-intelligence boom.
The Trump administration's latest round of tariffs hit several countries--such as China, Vietnam and Taiwan--that have key suppliers to the technology industry, which provide components ranging from semiconductor chips to the energy cooling systems that are needed to build data centers.
The emergence of AI and its potential for the future has been a key driver of the U.S. stock market, boosting the fortunes of tech companies that provide components to others that are developing AI models of their own. Any slowdown or increase in costs to building out the infrastructure needed to develop AI would be a hit to the U.S. economy.
Wedbush technology analyst Dan Ives estimates the tariffs would raise AI-data-center construction costs by 5% to 10%, increases that would be passed on to enterprises and, ultimately, to customers.
"The more expensive the data centers are to build, that all gets passed down through the system," Ives said. "It's an economic armageddon."
He added that the severity of the slowdown to data-center construction depends on how long the tariffs remain in place and at what level. "If the tariffs stay in place for a month, it guarantees a recession, in our view," he said.
Shares of tech companies slid further Friday as investors continued to digest President Trump's tariffs, as well as a retaliatory response from China. Meta Platforms, Oracle, Palantir Technologies, Nvidia and Apple were all down between 4% and 11%. Overall, the S&P 500 is on pace for the worst start to a quarter since the fourth quarter of 2008.
The data-center-construction industry already has dealt with tariffs during the first Trump administration, when levies were imposed on materials including steel and aluminum. Ives said that the most recent round is far more significant.
"I believe it could send the tech industry back a decade," he said.
Write to Sabela Ojea at sabela.ojea@wsj.com
(END) Dow Jones Newswires
April 04, 2025 14:34 ET (18:34 GMT)
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