For the better part of two decades, the technology sector has generated outsized returns against a broadly favorable macroeconomic backdrop – open trade corridors, accommodative monetary policy and seemingly inexhaustible infrastructure. That foundation is now cracking. By 2035, the valuations of chipmakers, cloud hyperscalers and consumer device companies will hinge as much on tariff schedules, grid capacity and geopolitical alignment as on product roadmaps or revenue multiples.
Governments are deploying tariffs and export controls not as emergency interventions but as standing instruments of industrial policy. Supply chains are being restructured around regional blocs as corporations seek to insulate their operations against geopolitical volatility. And the physical infrastructure that underpins the artificial intelligence boom – power generation, water supply and land – is fast becoming a binding constraint, redirecting data center investment and factory siting toward jurisdictions with spare capacity and cooperative regulatory environments. For investors evaluating technology assets, each of these forces carries direct implications for risk pricing, portfolio construction and deal structuring.
Tariffs move from shock to system
Almost immediately upon taking office, the second Trump administration imposed a 10% baseline tariff alongside a “reciprocal” framework that left open the prospect of significantly higher rates across a broad range of goods. For technology groups with globally distributed supply chains, this has replaced what was once a predictable cost base with a new regime of sustained uncertainty. In GlobalData surveys of business professionals from September 2025, 63% of companies described the proposed higher tariffs as negative for their business, and just over half anticipated a drag on their 12-month outlook. For investors, those figures translate directly into compressed margin guidance, more cautious capital expenditure commitments and a widening risk premium for trade-exposed names.
The reshoring paradox in semiconductors
The consequences of this new tariff architecture are still unfolding – and in some cases, counterintuitive. Several European nations supply critical semiconductor manufacturing equipment to US fabrication facilities. A 25% import duty on such tools would paradoxically inflate the cost of producing “Made in America” chips, undermining the very reshoring agenda the tariffs are designed to advance. For companies in the semiconductor value chain, this introduces the prospect of delayed expansion timelines, costly supplier requalification processes and complex rules-of-origin compliance. In the longer term, it may accelerate investment in domestic component manufacturing – but the capital requirements and execution risk of such a pivot are substantial, and national technology strategies may require significant rewiring.
Uneven exposure across subsectors
The impact is not uniform across technology subsectors. Mass-market consumer electronics carry relatively lower exposure, as manufacturers retain the flexibility to shift assembly operations to non-tariffed jurisdictions and substitute components sourced from unaffected countries. The more acute pressure falls on premium and niche device categories – high-end audio, precision optics and specialist appliances – where European manufacturers hold dominant market positions and buyer switching costs remain high. Meanwhile, because software remains largely untouched by the tariff wall, operators are being nudged further toward cloud-native, software-defined network architectures. This dynamic could shift, however, should the EU choose to extend counter-measures to US software vendors as part of a broader anti-coercion response – a scenario that would rewrite the competitive calculus for SaaS and platform businesses on both sides of the Atlantic.
Technology regionalism takes shape
Digital sovereignty and the new regulatory perimeter
Sweeping changes in trade policy, of which US tariffs represent the most conspicuous example, are only one dimension of a deeper structural shift toward technology regionalism. Governments are becoming increasingly explicit about “digital sovereignty,” conditioning market access on local data storage, domestic infrastructure investment and politically acceptable ownership structures. The US has opened Section 232 investigations into imports of medical equipment, robotics and industrial machinery, signaling a willingness to classify an expanding range of technologies as national security assets. For acquirers and strategic investors, this redrawing of regulatory boundaries is reshaping the universe of permissible targets and complicating cross-border deal execution.
Defense-adjacent sectors command a premium
The tariff and export-control environment is also steering capital toward defense-adjacent technology verticals – low-Earth-orbit satellite constellations, autonomous systems and post-quantum cryptography – where assured supply chains and trusted vendor relationships now command a premium over lowest-cost procurement. In these segments, strategic value increasingly derives from security clearances, sovereign manufacturing credentials and long-term government contracts rather than commercial market share alone. Technology firms that can credibly position themselves as domestic champions through factory footprints, data center presence and high-skilled employment may secure a more favorable regulatory posture than pure importers, regardless of their respective technical merits. For dealmakers, this creates a new lens for target evaluation: operational sovereignty is becoming a source of durable competitive advantage.
Supply chain diversification as a risk-adjusted investment
An additional consequence is the gradual but meaningful restructuring of global supply networks. Rather than optimizing a single, interconnected global supply chain for efficiency, technology companies are building parallel routes through North America, Europe and selected Asian markets. Near-shoring raises costs in the near term, as firms duplicate tooling, qualify new suppliers and maintain overlapping logistics infrastructure. In return, they gain operational resilience: fewer single-country chokepoints, stronger relationships with local authorities and a better negotiating position when tariffs or export controls tighten further. From a portfolio perspective, companies that have already invested in supply chain diversification may warrant a lower risk discount, while those still reliant on concentrated sourcing face a potential overhang.
Geography as a front-line investment variable
Certain regions are well positioned to capture the resulting reallocation of capital and trade flows. Mexico, China and North-East Asia stand to absorb US demand in automotive, electronics and machinery sectors as European exporters encounter new barriers, while Japanese, Canadian and South Korean supply chains are already positioned to fill emerging gaps. For investors, this means country risk is once again a front-line consideration in technology stock selection and deal origination. The same server platform or sensor array can represent a compelling investment in one jurisdiction and an expensive liability in another – a divergence that will reward granular, geography-aware due diligence.
Infrastructure hits physical limits
The power gap
Trade policy is only part of the macro equation confronting technology-focused investors. The physical infrastructure underpinning artificial intelligence is colliding with hard resource constraints that carry profound implications for asset valuation and capital deployment. Data centers running large-scale AI workloads draw power at levels that are already straining grids in established markets such as Northern Virginia, Silicon Valley and leading European data center hubs. Training a single frontier-scale model can consume tens of megawatt-hours, and the inference workloads that follow multiply those demands further still.
Critically, these power loads are materializing faster than new generation capacity can be brought online. The US Department of Energy estimates that the country will require an additional 100GW of peak capacity by 2030, with roughly half of that incremental demand attributable to data centers. While a new data center facility might be constructed in 18 months, the power plants and grid upgrades needed to serve it can take three times as long or more. This mismatch between digital ambition and physical delivery is already feeding through to the real economy: nationwide residential electricity prices were up just over 5% year-on-year by October 2025, with communities near major data center clusters experiencing markedly steeper increases. For investors in data center REITs, colocation operators and hyperscaler equities, the availability and cost of power are becoming as material to the investment thesis as occupancy rates and contract duration.
Water scarcity and permitting risk
Water represents the other binding constraint. Cooling systems for the dense compute loads that characterize AI workloads consume millions of gallons per year at a single site, and total data center water consumption is projected to rise by approximately 170% by 2030. In drought-prone regions, this trajectory places utilities, agricultural users and technology companies on a direct collision course. Local opposition has already slowed or blocked proposed developments in several jurisdictions, introducing an element of political and permitting risk to what were once regarded as straightforward real estate investment opportunities. Investors and dealmakers evaluating data center assets will need to stress-test water availability alongside power supply and connectivity – factors that are rapidly moving from the periphery to the center of infrastructure due diligence.
Winners, losers and the discipline test
Small-cap vulnerability
The emerging macro landscape poses especially acute challenges for smaller technology companies. These firms typically lack the balance sheet depth to absorb sudden tariff-driven cost increases, the legal and compliance resources to navigate an increasingly complex web of trade rules and the political relationships to lobby effectively for exemptions. Early-stage companies that depend on a single country for critical components or a concentrated revenue base face the very real risk that a single policy shift renders their unit economics unviable – a consideration that should weigh heavily in venture and growth-stage investment decisions.
The case for operational conservatism
Larger firms possess greater room to maneuver, but even they are being compelled toward more conservative strategic postures. Capital expenditure plans now routinely incorporate budget lines for redundant manufacturing capacity, secondary suppliers and geographically distributed data centers. These investments compress margins in the near term, yet they function as portfolio insurance against a range of tail risks – whether a sudden tariff escalation, an export-control ruling that severs a supplier relationship or a localized power crisis that takes capacity offline. For public market investors, the question becomes whether to reward this operational conservatism with a premium or penalize the near-term margin drag – a tension likely to define technology sector valuation debates through the remainder of the decade.
Durability over speed
By 2035, the phrase “macro risk” in the technology sector may carry an entirely different meaning than it does today. The stability of power grids, the consequences of intensified protectionism, the availability of water resources and regulators’ attitudes toward cross-border data flows will all have left an indelible mark on the competitive landscape. Companies that design their operations and structure their transactions for this environment – building diversified supply chains, securing resilient infrastructure, maintaining realistic pricing frameworks and preserving conservative balance sheets – may deliver more modest headline growth in the near term. But they are also far more likely to compound value over the full cycle, surviving the current period of friction and rerouting to capture the returns when a new equilibrium eventually takes hold. For investors and dealmakers, the discipline to prioritize durability over speed will be the defining strategic test of the decade ahead.
Discover further insights
To learn more, download The Future of Tech, 2025–2035: Insights for Investors & Dealmakers, published in association with Sterling Technology – the provider of premium virtual data room solutions for secure sharing of content and collaboration for the investment banking, private equity, corporate development, capital markets and legal communities engaged in technology andTMT M&A dealmaking and capital raising.
