Whether it’s shifting consumer demand, politics, the economy, or social trends, the tech sector is influenced by what’s going on in the world. Right now, however, no issues are having a more immediate impact than the rapid progression of artificial intelligence and recent trade policies.  

AI has advanced beyond the introductory stage to the implementation period. AI hyperscalers like Microsoft, Google, and Meta are set to spend over $320 billion in 2025 on AI-related technologies and infrastructure, up 40% from 2024.¹ Every sector appears to be pushing forward with AI adoption. Retailers use AI for inventory optimization; banks use it for fraud prevention; industrial companies use it to create predictive maintenance tools; and healthcare firms deploy AI for drug discovery and diagnostics.  

Generative AI tools like OpenAI’s ChatGPT have disrupted the tech sector, but a new entrant has further shaken things up: Chinese startup DeepSeek. In January, the company caused a stir with its latest model, DeepSeek R1, which it claims outperforms the latest OpenAI model at a fraction of the cost.² Fears over DeepSeek’s potential disruptive impact caused U.S. tech stocks to plummet—including erasing close to $600 billion from AI chipmaker Nvidia’s market capitalization.³ Several countries have banned DeepSeek due to being deemed a “national security risk.” Several U.S. states have also banned the app from government devices, and President Donald Trump’s administration is reportedly weighing a nationwide ban on government devices, citing concerns over DeepSeek’s handling of user data.⁴ 

But while AI has dominated conversations about the future of business, it’s clear we still haven’t fully grasped how quickly things are moving or the true potential impact of this technology. The most immediate impact comes from agentic AI, which can perform multistep tasks with little human intervention. Over the next five to 10 years, AI is going to evolve from AI assistants completing single tasks to AI agents independently perceiving, evaluating and solving more complex tasks—ultimately performing entire job functions. According to market intelligence firm IDC, “generative and agentic AI will completely transform the way enterprise applications are designed, delivered, and engaged with by users.” 

Some financial institutions have recently made generative AI assistants available to their employees, with an eye toward agentic AI, while others are exploring using AI for credit reviews. What would have taken portfolio analysts several days to complete can now be accomplished in a matter of hours. This isn’t something we expect to happen in the next few years; it’s happening now. These AI tools will significantly reduce turnaround times, costs and new product development cycles. And the speed of innovation will further accelerate in the medium to long term.  

“Artificial intelligence is expected to have a profound impact on the broader economy,” says Scott Anderson, Chief U.S. Economist at BMO Capital Markets. “Productivity enhancements at the individual and firm level are forecast to rapidly scale-up to bolster the entire economy’s productivity and GDP growth potential. And it could happen sooner than you think, within the next three to five years at current adoption rates.”  

In other words, the companies that don’t act now risk losing out to competitors who have adopted these tools.  

The Trump administration’s tariffs on a wide range of goods from the U.S.’s biggest trading partners—and the retaliatory tariffs imposed by some of those countries—are creating uncertainty across all industries, and the tech sector is no exception. Technology relies heavily on global supply chains, which makes it particularly susceptible to trade policy disruptions.  

The current tariff environment mostly affects the hardware side of the industry—semiconductors, communications equipment, and the like—in the following ways. 

Supply chain disruption. The tech sector relies heavily on integrated global supply chains. New trade policies may compel companies to reassess and restructure these networks, causing operational delays and increased costs. Many of these supply chain setups were already tested and improved on during the U.S.-China trade war that began in 2018 and the COVID-19 pandemic. Since then, many companies have diversified their manufacturing and/or supplier base globally, in some cases reshoring portions back to the U.S. They’ve also become more flexible in product design to adjust to component shortages. In some cases, companies can execute tariff-driven reshoring fairly quickly; in others—like the highly complex semiconductor supply chain—the process could take several years. 

Increased production costs. Tariffs on essential components, such as semiconductors, are expected to raise manufacturing expenses for tech companies, potentially leading to higher consumer prices.  

Investment uncertainty. The unpredictability introduced by fluctuating trade policies can deter investment within the technology sector, as businesses may hesitate to commit resources amid an unstable trade environment. 

In the face of these potential shocks, tech companies may consider going back to pandemic-era strategies like diversifying their supplier base or reshoring manufacturing capabilities in the U.S. Apple, for example, recently announced a $500 billion investment in U.S. facilities over the next four years, which could help it avoid tariffs on goods imported from China.⁵ 

But reshoring is not a short-term fix. It’s a process that will take years before companies—and the U.S. economy—see any benefits. In the meantime, companies can focus on short-term solutions by answering the following: 

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  Do you already have a diversified supplier base to mitigate potential tariff-related impacts? 

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  Can you pass on part or all of the cost from tariffs to your customers? 

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  Can you replace imported components with ones manufactured in the U.S.? 

Bottom line: The time to act is now. 

_{1 Forbes: “Tariffs, AI and A Strong Dollar Drive Key S&P 500 Q4 Earning Trends"}  

_{2 BBC: “DeepSeek: The Chinese AI App That has the World Talking"}  

_{3 CNBC: "Nvidia Sheds Almost $600 Billion in Market Cap, Biggest One-Day Loss in U.S. History"} 

_{4 Reuters: "US Mulling a Ban on Chinese App DeepSeek from Government Devices, Source Says"} 

_{5 CNN: "Apple, Facing Tariffs on Chinese Imports, Says it Will Invest $500 Billion in US Facilities"}