Technology under pressure: How policy changes and tariffs could affect the industry in 2025

The year that just ended brought another significant return for technology stocks, as investors and the mega-companies themselves poured billions into artificial intelligence, thus driving market favorites to new heights.

The stocks of the “Great Seven,” led by Nvidia, dominated the investment landscape in 2023, sending broad market indexes to new records. Nvidia, the leading manufacturer of semiconductors for artificial intelligence, earned a coveted spot in the Dow Jones Industrial Average at the end of the year, with all but Microsoft outperforming the benchmark S&P 500, which jumped 27% in 2024, while the Nasdaq Composite rose by 34%.

Forecasts for 2025 suggest that many Wall Street analysts and portfolio managers expect technology’s strong performance to continue but also predict the expansion of AI’s impact across the entire sector and the broadening of AI themes.

“This year was clearly the year of artificial intelligence, with Nvidia paving the way in terms of trends and themes,” said Greg Basuk, CEO of AXS Investments. “2025 will more likely be the year of AI’s adjacent sectors. Next year will truly be the year of the transition from hardware to software.”

More than two years after the debut of ChatGPT in November 2022—the AI chatbot that answers questions using natural language to generate human-like text—investor attention remains focused on how artificial intelligence is used today and its future applications.
This enthusiasm is expected to continue into the third year, 2025.

However, the path is unclear. As the new year approaches, technology stocks will face a new administration in Washington, which will take office in just over three weeks, and the Federal Reserve, which has begun to implement slower policies with lower interest rates after the most aggressive period of tightening monetary policy in a generation.

While stocks rose after the election victory of President-elect Donald Trump last month, his campaign promises to impose tariffs to protect American businesses could disrupt tightly connected international supply chains.

Tariff Threat
The potential increase in tariffs in the new year creates uncertainty for the tech sector, especially for semiconductors, which rely on parts from Taiwan and other countries.

“The good news is that over the last decade, companies have taken significant steps to diversify their supply chains,” said Scott Kessler, head of technology, media, and telecommunications at the global research center Third Bridge. “Higher tariffs could be seen as a risk, but people aren’t sure what will be proposed, what will be enforced, and how long these measures will last.”

Even under the outgoing administration, companies have faced operational restrictions. For example, last year, the Biden administration imposed new restrictions, banning the sale of certain advanced semiconductors from Nvidia to China over concerns they could be used by the military.

Taiwan could also be affected by tariffs under the Trump administration, as the president-elect stated in a podcast in October that the island nation had stolen chip business from the U.S.

It is also possible that tariffs could have a dual effect and turn out to be beneficial for American companies, reducing foreign competition, said David Miller, Chief Investment Officer at Catalyst Funds. The tariff threat could also serve as a negotiation tactic to improve trade relations, he added.

“We already have disagreements with China, but if things reach the point they’re at with Russia, we could find ourselves in a really bad situation,” said Miller.

Artificial Intelligence and Nvidia’s Evolution
Many Wall Street analysts believe that 2025 will be the year when the story of artificial intelligence expands beyond a few infrastructure builders and leading large-cap companies.

For over two years, companies have been touting the potential applications of artificial intelligence, but few have implemented specific projects on the market. Notable exceptions are Apple, which recently launched its Apple Intelligence AI initiative, and Microsoft, which introduced its Copilot assistant.

However, many smaller companies have failed to achieve such goals.

“There’s a reason they call these companies ‘The Great Seven,'” said Miller. “They are in monopolistic positions in their industries, and I don’t think anything major is stopping them.”

One of the biggest questions for 2025 is what will happen to the AI leader Nvidia after another year of dramatic market valuation increase and record profits.