The most recent quarterly earnings results of Alphabet, Amazon, Meta, and Microsoft offer insights into how the Trump administration’s tariffs might affect tech companies’ capital expenditures on data centers and other infrastructure that supports their AI efforts. For now, the impact appears minimal, but in the medium and long term, US tariffs could have significant effects on companies’ artificial intelligence-related investments.
The four companies are still making enormous outlays. Together, they reported capital expenditures of almost $77 billion for the quarter. For context, that’s more than the US government spends annually on highways and bridges and more than three times NASA’s annual budget.
- Alphabet invested about $17.2 billion. Servers represented the largest share of that investment, followed by data center expansion. Alphabet is also spending on specialized AI chips and subsea cables. This investment was about a 20% increase over the previous quarter ($14.3 billion) and an almost 80% increase year-over-year (Q1 2024 was about $9.6 billion).
- Amazon spent $24.3 billion in the quarter, most on AWS cloud infrastructure and developing AWS’s Trainium specialized AI chips. This represented a slight decrease—7.6%—from the previous quarter’s investment but a significant increase of 74% year over year.
- Meta invested $13.7 billion in the quarter, a decrease of just under 7.5% from the previous quarter ($14.8 billion) but a massive jump of 93% compared to Q1 2024. Although Meta doesn’t operate a public cloud like the other companies, its capital expenditures make it look like a hyperscaler.
- Microsoft poured $21.4 billion into opening data centers in ten countries and advancing its global AI infrastructure. This represented an increase of almost 13% from the previous quarter’s $19 billion investment.
Given the uncertainty around the Trump administration’s decisions, it’s too early to know the ultimate impact of tariffs on these tech investments. An important caveat is the administration’s decision to implement a 90-day pause and exemptions specifically for semiconductors and related components. The pause likely softened and delayed some immediate effects on capital investment, giving companies a short-term window to accelerate purchases and stockpile components. Uncertainty remains high because this relief might be temporary and subject to future trade agreements.
Amazon’s Q1 earnings call reflected both this uncertainty and the preemptive actions that companies are taking to respond. During the call, Amazon said it “pulled forward inventory in Q1 ahead of anticipated tariffs.” Going forward, Amazon stated that it’s “hard to tell what will happen with tariffs right now. It’s hard to tell where they will settle and when they will settle.”
Although Meta did not tie current capital spending levels to tariffs, it acknowledged that trade dynamics are driving up the price of infrastructure hardware. The company noted that the “higher cost we expect to incur for infrastructure hardware this year really comes from suppliers who source from countries around the world,” and that there’s “just a lot of uncertainty around this given the ongoing trade discussions.”
Microsoft acknowledged tariff-related effects more indirectly, noting during its earnings call that “tariff uncertainty resulted in inventory levels that remained elevated.”
In contrast to its peers, Alphabet did not mention tariffs, trade risk, or related cost impacts during its Q1 2025 earnings call.
One critical unanswered policy question is whether higher tariffs on imported data center components advance or undermine the Trump administration’s objective of accelerating American AI infrastructure development. At minimum, the administration’s inconsistent tariff approach complicates companies’ ability to plan long-term strategies, increasing uncertainty and potentially driving higher costs or delays in infrastructure deployment.
Another issue is that not all capital investments are created equal. With high tariffs and component costs, $10 billion today may not buy what it did a year ago. So we might still see big spending numbers, but companies might only get nine instead of ten data centers.
And these investments don’t just happen in the US. Higher tariffs could prompt American cloud companies to shift more of their capital investments abroad. However, these decisions will hinge significantly on the Trump administration’s approach to export controls on advanced AI chips. In other words, while tariffs might push cloud investments overseas to cut costs, tighter export controls on advanced AI chips could pull companies back toward the US, creating strategic uncertainty for American tech companies. (new paragraph) It’s also worth watching how other countries respond. European providers like France’s OVHCloud, which recently announced €193 million in investment for the first half of its 2025 fiscal year (September through February), may benefit from a higher-tariff environment, especially if US tariffs prompt governments to favor domestic or regional infrastructure over US-owned clouds.
Though OVHCloud’s investment pales beside US companies, other European providers and European governments are boosting spending on cloud and AI infrastructure, which could potentially dampen future spending by US companies.
For now, however, these companies remain committed to massive investments. For them, it’s not a wait-and-see moment. Instead, they’re in build-now-and-keep-building mode , pushing forward despite tariffs and other government-generated risks.
Pablo Chavez is an Adjunct Senior Fellow with the Center for a New American Security’s Technology and National Security Program and a technology policy expert. He has held public policy leadership positions at Google, LinkedIn, and Microsoft and has served as a senior staffer in the US Senate.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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