Tech Giants Bet Big on AI as Tariffs Loom

In August 2025, the White House, Wall Street, and Silicon Valley are united in their focus on advancing artificial intelligence (AI) technology. The Trump administration released an AI action plan in July 2025 to bolster America's leadership in the field, while major tech firms are investing heavily in new data centers and infrastructure to support their AI initiatives.

Meta, Microsoft, and Google have all reported significant increases in capital expenditures related to AI in their recent earnings reports. Meta spent $17 billion on infrastructure in the second quarter of 2025, while Microsoft plans to invest another $30 billion in the coming months. Alphabet, Google's parent company, has even increased its capital expenditures for 2025 to $85 billion to meet the growing demand for its cloud services, which are used by "nearly all gen AI unicorns."

However, the Trump administration's ongoing trade war and tariff policies have raised concerns about the potential impact on the tech industry's AI push. Certain tariffs, such as a 100% levy on semiconductor imports and a 50% tariff on copper, could increase the costs of materials and components necessary to support AI models. Experts estimate that tariffs could raise data center construction costs by 5-7%.

While large tech firms are likely to absorb these additional expenses due to the strong demand for AI, smaller companies with tighter budgets and shorter investment horizons may face greater challenges. The uncertainty surrounding tariffs could make it more difficult for these firms to commit to the long-term projects required to build AI infrastructure.

Despite these concerns, industry analysts believe the stakes are too high for tech giants to slow their AI investments. Losing ground in the global AI race would be a far greater threat to their businesses than any tariff-induced cost increases.