How Trump Tariffs Would Push Big Tech's AI Data Center Costs Higher

Yahoo Finance
03-31

Big Tech is set to spend hundreds of billions of dollars this year, much of it to construct huge data centers that will power the industry's artificial intelligence efforts. But President Trump's tariffs could push those costs higher, analysts told Yahoo Finance, raising both the price of construction materials and data center equipment produced in targeted countries.

Overall, CBRE estimates Trump's tariffs will raise construction costs for commercial projects by 3% to 5%. Steel, aluminum, and copper — products targeted by Trump — are the building blocks of data centers, used for the facilities' structures, electrical infrastructures, and cooling systems.

"As they [Big Tech companies] try to build out AI data centers, this is going to have an effect on their ability to do so," CSIS director of strategic technologies Matt Pearl told Yahoo Finance. 

Amazon (AMZN), Microsoft (MSFT), Google (GOOG), and Meta (META) — so-called Big Tech hyperscalers that operate data centers around the country, some of which they own and some of which they lease — have said they will spend a cumulative $325 billion in 2025 as they rush to build out infrastructure.

But Trump has implemented 10% tariffs on Chinese imports in addition to existing duties, and he plans to enact 25% tariffs on imports from Canada and Mexico April 2, as well as reciprocal tariffs on other US trading partners, potentially including Taiwan. On top of those country-specific tariffs, Trump said this week he would impose an import tax on internationally produced semiconductors "down the road," though it's unclear what such duties would look like, as Yahoo Finance's Dan Howley wrote.

In 2024, the US imported roughly $33 billion in computer parts from Taiwan, including Nvidia's (NVDA) GPUs, according to US trade data compiled by supply chain analyst and Michigan State University professor Jason Miller. US trade data also shows the country imported $43 billion in "computers" — a data classification category that includes data center servers —from Mexico and an additional $34 billion worth of the goods from China.

In other words, lots of data center equipment used to operate facilities is coming into the US from Mexico, China, and Taiwan. Trump hasn't provided information on the level at which he will tariff goods from Taiwan.

Then there are electrical components needed to build data centers.

"The supply chain has been constrained for years and getting access to the components necessary to build data centers and the infrastructure that supports data centers," Barclays analyst Brendan Lynch explained. 

"In particular, the electrical components, such as transformers, has been a constraint on growth in the industry, to the extent many of those components are coming from overseas, that would increase the cost [of data center construction] if tariffs were implemented." 

Still, he said, data center operators are so hungry to build out their AI capacity that they may simply take the hit from tariffs to get ahead.

Lynch continued: "They will definitely spend more ... it's just going to affect the yield on the project for the data center developer [data center companies whose facilities are leased and operated by Big Tech hyperscalers] or it's going to cost the hyperscaler more if they're doing it internally."

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