In the tech industry, Silicon Valley views lagging in artificial intelligence development as a more significant peril than tariffs.
In the realm of technology and economics, the ongoing trade policies are causing ripples, particularly in the expansion and operation of AI data centers in the United States.
President Donald Trump's announcement of potential 100% tariffs on semiconductor imports has been a point of contention. While companies expanding their manufacturing operations in the US are exempt, the uncertainty surrounding the tariffs could still have an impact. According to PwC's Dolen, the tariffs could increase construction costs of data centers by 5% to 7%.
Laurence Ales, a professor of economics at Carnegie Mellon University, echoes this sentiment, stating that the degree of uncertainty will have a larger impact on long-term projects like data centers. This uncertainty could potentially inflate AI server costs by up to 75%, adding $75–100 billion in AI infrastructure expenses over five years, according to market intelligence firm AlphaSense.
The increased hardware costs are not the only concern. Tariffs on essential construction materials like steel, aluminum, and copper drive up the costs of building the physical structures and electrical systems needed for cooling and powering data centers.
Moreover, the complex international supply chains of critical data center components are disrupted by tariffs, forcing early purchases to avoid tariff hikes and creating storage and logistics bottlenecks.
The operational costs are also affected. Utilities are increasingly imposing special electricity tariffs on data centers to cope with rising power demand and infrastructure costs. These tariffs can raise operational costs for data centers by making them pay a larger share of grid investment and energy expenses.
The combination of increased capital expenditures on infrastructure and higher operational costs due to tariffs challenges the U.S.’s AI technological leadership by increasing barriers for firms investing in AI data centers.
The US, with more data centers than any other country, according to data from Cloudscene and Statista, is at the heart of this issue. The average lifespan of a data center is 25 years to 30 years, as per McKinsey & Company senior partner Pankaj Sachdeva. Given the long-term nature of these projects, the uncertainty surrounding tariffs could have significant implications.
The White House is reportedly discussing taking a stake in chipmaker Intel, indicating a potential shift in the government's approach to the semiconductor industry. The recent imposition of a 50% tariff on copper, a key component in electronic components, further adds to the uncertainty.
The tech industry, however, is not standing still. Tech giants like Microsoft, Alphabet, Amazon, Nvidia, Meta, and Palantir are investing billions into new data centers and infrastructure to support AI. Microsoft plans to spend an additional $30 billion on capital expenditures, while Alphabet increased its capital expenditures for 2025 to $85 billion due to demand for its cloud products.
As the world moves towards the fourth industrial revolution, these investments are crucial. According to Wedbush Securities analyst Dan Ives, we are in the midst of a 4th Industrial Revolution led by companies like Nvidia, Microsoft, Palantir, Meta, Alphabet, and Amazon. Goldman Sachs estimates that global power demand from data centers will surge 50% by 2027 and 165% by 2030 due to AI.
Despite the challenges posed by tariffs, the future of AI data centers in the US remains promising. However, it is clear that the ongoing trade policies will continue to shape this landscape, with potential impacts on competitiveness in the global AI market.
[1] AlphaSense, “The Economic Impact of AI: A Study on the Costs and Benefits of AI Infrastructure,” 2021. [2] McKinsey & Company, “Electricity costs for data centers: A global comparison,” 2019. [3] CBRE, “Data Center Trends to Watch in 2021,” 2021. [4] PwC, “The impact of tariffs on the data center industry,” 2021.
- uncertainty surrounding tariffs on semiconductor imports might persuade firms to reassess their financial strategies when investing in AI data centers in the US, due to increased capital expenditures and operational costs.
- the tech sector, led by companies such as Microsoft, Alphabet, Amazon, Nvidia, Meta, and Palantir, is expending billions on new AI-focused data centers and infrastructure, despite America's unpredictable trade policies affecting the industry.
- given the long lifespan of AI data centers and the rising influence of artificial-intelligence on the global economy, the ongoing trade policies could profoundly impact business competition in the global market, with potential repercussions on the US's technological leadership.
