Who feels the heat?

US crude falls sharply this morning, nearly 3% at the time of writing, after approaching the 200-DMA yesterday near $62.50pb, following reports that the killings stopped and the US said it may hold off on military action for now. Silver fell more than 5%, while gold saw a more moderate pullback — under 1% from its all-time high this morning. Copper futures are down by up to 1.76% from ATH levels, as well.

Even though concerns around Iran seem to be easing, tensions remain. Encouraging headlines have triggered a pullback in commodities that had seen safe-haven inflows. However, the broader “debasement trade” — driven by political and geopolitical uncertainty and White House policy moves — is likely to continue, keeping pressure on the US dollar, Treasury yields and potentially US equities.

Trade tensions have receded into the background given the stronger geopolitical headlines since the start of the year, but negotiations continue. The Supreme Court, for example, again delayed ruling on the legality of Trump’s tariffs yesterday. Meanwhile, the US approved the sale of Nvidia H200 chips to China, but also announced a 25% tariff on these exports.

Under the new order, the US government will collect 25% fee when H200 chips are imported from TSMC in Taiwan into the US before final shipment to Chinese customers or other foreign markets.

Is this bad news for Nvidia? Not necessarily. China does not currently have a chip as advanced as the H200, and the country may want to import these chips until domestic alternatives close the gap. But political risks exist on both sides: the US imposes tariffs, while China has recently ordered its customs authorities to halt imports of H200 chips, aiming to support its domestic chip industry. Nvidia CEO Jensen Huang has stated that the company assumes Chinese sales will remain zero for the foreseeable future, so any sales there would be a bonus. Demand outside China remains robust, and upcoming earnings will provide a clearer picture.

On the earnings front, TSMC, which manufactures Nvidia chips, surpassed Q4 expectations, with revenue up more than 30%, exceeding both its own guidance and the 25% analyst forecast. Strong AI demand is driving this growth. Despite the positive earnings, TSMC shares are down more than 1% this morning due to the new tariff news. The company plans to open six fabs in the US to manufacture chips locally and avoid import tariffs, but construction takes time. Building a leading-edge facility costs around $20bn, and running one in the US is 30–50% more expensive than in Taiwan, potentially impacting both TSMC’s margins and its clients’.

And there is another problem: the rules of the game for business remain unpredictable — whether in chips, healthcare, or credit cards — as tariffs and fees can change rapidly.

Diving deeper into short-term costs across tech: global technology companies, particularly data center operators, are facing rising prices for metals used in construction and operations. Copper prices on COMEX, for example, rose 50% last year, 90% since mid-July, and 200% since 2020.

The question is, what’s the impact on different tech companies?

For data center operators, rising input prices will naturally squeeze margins. But the ripple effects through the supply chain will depend on 1. How much of data center costs are passed to clients and 2. The price elasticity of the end customer.

Big data center providers including Google, Microsoft and Amazon will be feeling the heat as it would be costlier to build the data centers and run them. The bad news is that the data center revenue is the biggest growth engine for these companies. But the good news is that they represent only a part of these companies’ total revenues. ~78% of Google’s revenue comes from ads & software services. The cloud revenue stands for around 11% of the total revenue. As such, the impact of higher costs on data centers could be absorbed and have a marginal impact on overall profitability. Similar reasoning could be applied to Microsoft and Amazon.

Further down the line, for the chip designers like Nvidia and AMD, the impact would be less. These companies have high pricing power (little price elasticity) and very high margins – we’re talking about a more than a 73% gross margin for Nvidia in the latest quarterly results. And this setup will remain unchanged as long as the demand for AI chips remains this strong. Therefore the chipmakers’ ability to past additional costs on to their clients should help them defend their profit margins and keep them at a safe spot.

For the rest of the economy, the rising input costs will increase the cost of AI, but the impact on the overall sector growth remains to be seen. AI increases productivity, reduces costs. Gains will in many cases remain higher than the additional costs.

And frankly, for many tech and non-tech companies, man-made trade tensions, supply restrictions on important metals and tariffs represent a higher risk than the input prices.