Shares of the tech-giant Microsoft (MSFT +0.59%) were plummeting today as the broader market responded negatively to an escalating trade war with China. Investors are still trying to decipher the impact of 10% tariffs on other countries -- along with 145% on China -- and if higher tariffs are still on the table after President Trump walked back some of the highest ones yesterday.
Additionally, Microsoft investors are likely processing news from yesterday that said the company may be cutting additional jobs next month, as well as its decision to scale back some data center investments. Microsoft's stock is down 3.2% as of 2:09 p.m. ET.
Uncertainty around tariffs, jobs, and data centers
President Trump said today that tariffs against Chinese imports would increase to 145% in a move that shows China and the U.S. are currently locked into a trade war. Yesterday, Trump lowered tariffs on most countries to 10%, but investors fear that the chaotic approach to tariffs and their effects could slow down consumer and business spending.
NASDAQ: MSFT
Key Data Points
Specifically, Microsoft investors may be worried that any economic pain could cause Microsoft to pull back technology investments. Earlier this week, the company said that it's "slowing or pausing" some early-stage projects, including a $1 billion data center investment in the U.S.
Tech companies have generally been ramping up their data center spending as they try to outpace each other to have the most advanced artificial intelligence (AI) systems.
Making matters worse is that Business Insider reported yesterday that Microsoft may be cutting some jobs as early as next month. The jobs would mostly likely be in middle management, according to the report. Microsoft has yet to announce anything but already scaled back its workforce earlier this year, cutting 2,000 jobs.
The threats are real, but don't panic
It's still unclear what impact the potential tariffs could have on the tech sector, but it likely won't be good. An ongoing trade war with China and significant tariffs for other countries could end up slowing down businesses across almost every sector in the U.S.
Microsoft investors may want to take a breath right now and realize that the company is still a tech leader in the U.S. and well-positioned to benefit from cloud computing and artificial intelligence in the coming years. Even if a slowdown occurs, Microsoft is unlikely to lose its strong footing in these markets.
