How New Tariffs Could Cost America Its AI Leadership, According to Top Tech Investor

"Geopolitically, nothing matters more than winning AI. These tariffs, as constructed, essentially guarantee that America will lose 'AI' by making America the most expensive place on earth to build AI datacenters," warns prominent tech investor Gavin Baker in a stark assessment of the new trade policies.

End of Miles reports that Baker's analysis highlights critical flaws in the approach to tariffs that could fundamentally undermine American competitiveness in artificial intelligence development.

The Semiconductor Disconnect

Baker, Managing Partner and CIO at Atreides Management, dismantled a key assumption behind the tariff strategy. "The semiconductor exemption was irrelevant for AI," he explained. "Datacenter semiconductors come into America in finished goods from Taiwan and other Asian countries: servers, storage systems and networking switches."

"By the time we have developed the capacity to domestically produce these systems, we will have lost the AI race." Gavin Baker

The investment executive's concerns center on the practical realities of how AI infrastructure is built and deployed. Modern AI systems require massive computational resources housed in specialized datacenters – facilities that may now become prohibitively expensive to build on American soil under the new tariff regime.

Geopolitical Consequences

According to Baker, the international response has compounded the problem. The administration apparently assumed other countries would "come meekly to the negotiating table" – a calculation he describes as a "wild gamble" that has already proven mistaken.

"Outside of this dynamic, the assumption that other large countries would not retaliate and instead come meekly to the negotiating table was erroneous. That was the off ramp and Bessent did his best to encourage the world to take it. China, understanding how awesome all of this is for them, did not take the off ramp. Epic win for China." Baker

The Atreides Management CIO represents a perspective from within the investment community that watches AI development closely. His assessment suggests the tariffs could achieve the opposite of their intended effect by inadvertently strengthening China's competitive position.

Potential Recovery Strategies

Despite his criticism, Baker outlined potential recovery strategies. "Best outcome from here would be to quickly cut 'deals' with friendly Asian countries - Japan, Taiwan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, etc," he noted, suggesting a more targeted approach might salvage America's position.

He proposed that "something like a 10% tariff plus true reciprocal tariffs (which would quickly go to zero) would be reasonable" as an alternative to the current policy.

The investor emphasized that he wasn't categorically opposed to tariffs, but rather questioned their design and implementation. "I say all of this as someone who was open-minded to tariffs that were thoughtfully constructed, gradually phased in and accompanied by massive deregulation," he wrote.

"Hopefully the market helps the President realize that a course correction is needed and the necessary changes are made relatively quickly. The sooner, the better." Gavin Baker

With AI competition intensifying globally, Baker's assessment highlights how seemingly technical trade policy decisions may have profound implications for America's technological leadership in what many experts consider the most consequential technology race of our time.