On Saturday, the technology sector found some relief after President Trump announced that industries such as semiconductors, computer hardware, and smartphones would be exempt from the new steep reciprocal tariffs. However, Commerce Secretary Howard Lutnick suggested that this reprieve might only be temporary.
Continuing the discussion on Sunday, Lutnick, a notable supporter of tariffs to bolster U.S. manufacturing, discussed the potential implications of import taxes on the technology sector. This revelation injected uncertainty for major U.S. tech companies, including Apple, Dell, and Nvidia, which largely rely on overseas production to keep costs manageable.
The stock market experienced significant returns of over 20% in both 2023 and 2024, driven predominantly by robust performances from America’s largest technology companies. Notably, the group known as the “magnificent seven,” consisting of Apple, Microsoft, Amazon, Alphabet (Google), Meta Platforms (Facebook), Nvidia, and Tesla, excelled partly due to growing enthusiasm around artificial intelligence.
Following OpenAI’s ChatGPT’s rapid user growth in 2022, major tech companies invested heavily in developing and operating their own large-scale AI models and AI programs designed to enhance and occasionally replace the workforce. These technological advancements have permeated various industries, with AI being integrated into banking, retail, manufacturing, and even military operations, indicating a comprehensive refresh cycle across all tech-related infrastructures.
Central processing units in enterprise and cloud networks operated by companies like Google, Amazon, and Microsoft are being replaced by Nvidia’s graphic processing units (GPUs) to accommodate AI demands. This shift is resulting in updates to servers and computers, boosting revenue for companies like Dell and Super Micro. Moreover, by 2025, Microsoft, Meta Platforms, Alphabet, and Amazon collectively plan to spend approximately $325 billion on resources necessary to sustain and grow their businesses, heavily focused on AI. Nonetheless, these plans could face reconsideration due to tariffs potentially increasing costs and slowing economic growth.
The potential deceleration has already prompted reports of Microsoft slowing its data center expansion, with indications that this trend could continue if tariffs lead to higher prices and a weakened economy, resulting in canceled orders. In addition to impacting AI strategies, tariffs may increase costs for consumer electronics like laptops, smartphones, and TVs, possibly influencing consumers’ decisions to upgrade their devices.
These developments have triggered a sell-off in technology stocks, with Nvidia and Apple experiencing declines of 9% and 7% respectively this month. Overall, Roundhill’s Magnificent Seven ETF MAGS has decreased by 18% this year, with a 3.5% decline noted this month.
Despite some relief for technology investors due to an exemption provided on Saturday for commonly used electronics such as laptops, computers, semiconductors, TVs, and solar cells, the situation remains uncertain. This exemption, covering imports valued at nearly $390 billion, includes over $100 billion from China, where tariffs now total 145%. The exemption does not include a separate 20% tariff on Chinese goods announced before April 2.
Comments made by Commerce Secretary Lutnick on April 13 suggested that technology tariffs would be considered separately from reciprocal tariffs and that new “sector” tariffs could soon be imposed. Lutnick remarked that these sector tariffs would not be part of negotiations, emphasizing the importance of reshoring semiconductor and pharmaceutical production. Consequently, the tech sector may receive treatment similar to autos, which face a 25% tariff, and pharmaceuticals, which are also being targeted individually with tariffs.
The inconsistent messages from the weekend regarding technology tariffs present challenges for businesses requiring policy stability for long-term planning. Excluding these tech products from reciprocal tariffs was described as removing a “doomsday scenario” by tech analyst Dan Ives, although uncertainty and confusion about future developments remain pervasive.
