How will tariffs impact Big Tech’s AI data center plans? Not that much, says Morgan Stanley (2025)

Microsoft has halted a data center project in Heath, Ohio, catching local officials off guard, according to Bloomberg.

This follows earlier reports of the company pausing or canceling other AI infrastructure projects in the US, which could indicate overestimated demand for data centers as the industry goes on a massive $315 billion capex spending spree.

It’s no secret that Apple’s AI is not very good.

The iPhone maker’s AI assistant Siri has been lagging the industry, as the company experiences executive shakeups and feature delays. Now Apple, which has had to walk a fine line between balancing its vaunted user privacy with progressing in AI, is hoping that by analyzing user data on its devices, it can bolster its AI chops.

Wedbush analyst Dan Ives wrote in a note this morning that the “concept of a US made car with all US parts is a fairy tale fictional narrative,” so he considers potential tariff relief to be “good news” for Tesla, as well as GM, Ford, and Stellantis. Despite manufacturing its cars for the US market in the US, Tesla still relies heavily on parts made in other countries, including Canada and Mexico. Ives wrote:

“While Tesla is in a much better situation relatively speaking... the auto tariffs are a complicating factor that could disrupt the supply chain and add cost inputs at a time Tesla and Musk are trying to balance its operations globally.”

And Tesla has a lot of other problems to worry about beyond tariffs.

Ives estimated the price increases resulting from the tariffs — $5,000 on the low end and $10,000 to $15,000 on the high end — would cause demand destruction of 15% to 20% for the US auto industry this year.

Apple is currently in tariff limbo, having been exempted from reciprocal tariffs and not yet having been assigned sector tariffs. Presumably, the new tariffs won’t be as bad as the previous 125% levies Apple was facing on China imports, so the hit to Apple’s earnings will likely be much less. Investors consider that pretty good news, with the stock closing up over 2% today — enough to bring Apple back into the $3 trillion club, which it had exited 10 days ago. It’s a lonely spot, though, since it no longer shares the space with Microsoft or Nvidia.

Apple just had its best first quarter ever in terms of iPhone shipments, according to new data from IDC’s Worldwide Quarterly Mobile Phone Tracker, having moved 57.9 million units. But that growth doesn’t necessarily mean Apple is selling more iPhones. Apple has been stockpiling its flagship product in the US — recently shipping 1.5 million iPhones to the US from India — in order to avoid incoming tariffs, so it’s likely that behavior is showing up in its shipment data.

To get an approximate idea of how many of those phones were part of the stockpiling effort, one could look toward IDC’s January forecasts, which were made long before the news or reciprocal tariffs rattled Apple. The market intelligence firm had previously estimated that Apple would ship 52.6 million units in Q1 — the same as last year, which is also in line with Morgan Stanley estimates for the year — so it’s possible that about 5 million of the shipments were due to tariffs.

“Faced with heightened geopolitical uncertainty and the looming threat of substantial US tariff hikes on goods imported from China, vendors strategically accelerated production schedules and pulled forward significant shipment volumes, particularly into the critical US market, during Q1 2025,” Francisco Jeronimo, VP of client devices at IDC, said. “This supply-side surge, aimed at mitigating potential cost increases and disruptions, effectively inflated Q1 shipment figures beyond levels anticipated based on underlying consumer demand trends alone.”