After President Donald Trump's launched his “Liberation Day” tariff agenda, the tech-heavy Nasdaq Composite stock index suffered its biggest plunge since March 2020. The so-called Magnificent 7 — Nvidia, Apple, Meta, Amazon, Google, Microsoft and Tesla — lost a combined $1.8 trillion of market value in two days.

The tariff-induced downturn in business conditions is likely to be temporary, according to Daniel Newman, CEO and chief analyst at the Futurum Group, a tech research and advisory firm. Newman told Marketplace’s Meghan McCarty Carino that tech consumers might feel more of the pain, but not much can stop corporate AI adoption and the data center buildout.

The following is an edited transcript of their conversation.

Daniel Newman: The consumer part of technology, I think, is really at risk with things like PCs and smartphones. We're saying, hey, we're going to build and screw in our iPhones here. Are we ready for $5,000 iPhones? So if I'm on the consumer side and I'm investing in a company like Apple, I'm really nervous right now, and I think this selling pressure on Apple, which has historically been a flight-to-safety name, is evident that people just don't know. They're not confident. And despite its half-trillion-dollar commitments to do more in the U.S. and even its comments about doing more in India, nobody seems to feel comfortable that the consumer demand will be there because that's also tied to things like recession. So that means a lot of things that smaller companies, individuals, buy become more at risk. Now, on the other side of this, I actually have spent time with a number of CEOs in the Big Tech and megacap companies, and both my perspective and theirs is that things like enterprise [artificial intelligence] and the buildout of the AI superhighway of the future, these big data centers — almost tariff-proof. And there's a couple reasons that it is. One is the large companies will double down on R&D and investment during down cycles. This will give them a meaningful advantage, knowing that at some point, no matter where we land with these tariffs, markets will normalize. People will adjust to it, and the markets will start to grow again. This will not be permanent downside. I do not believe it will be permanent downside, but the uncertainty, as long as it lasts, will come with a lot of either up-and-down whipsaw, like I said, or continued consternation, because the CEOs I talked to are also in a somewhat difficult position to make decisions. But the AI data center build, if I'm looking at companies like Nvidia, if I'm looking at companies like Microsoft that have relatively low consumer exposure, I'm feeling more optimistic.

Meghan McCarty Carino: What exactly makes the data center business kind of tariff-proof? I think about kind of physical infrastructure building, we've heard a lot about how the housing market and, you know, building residential could become a lot more expensive. Data centers are also made of stuff that could be tariffed.

Newman: Yeah, obviously there's a lot of kind of speculation, some of the continuation of USMCA and the no-tariffs-on-semiconductors [policy] right now is enabling a lot of at least fundamental belief before 232 is fully unpacked, and a longer-term semiconductor decision is being made that you could basically ship chips into the U.S. or Mexico, have these things assembled and avoid tariffs. Now, again, that's just the racks. That doesn't count all the other things that go into a data center. Steel, of course, you know, you've got major workforce issues. You know, we've got, obviously, the two sides of the immigration debate. We know what we're trying to accomplish with safety and security of our borders. But also we know that a large part of workforce that do things like build homes and buildings, maybe we have less access to that type of workforce, bringing input costs up. Of course, all the other things that go into these buildouts and facilities, energy, all things that are going to be up for debate in terms. But realistically, it's about the fact that companies like Microsoft, Google, Amazon, they have massive operating leverage, and so during this sort of market recession or downturn, they will separate themselves from startups that may have trouble raising meaningful capital, from midsize and growing competitors in the middle of the market that won't be able to invest as heavily. They can build out their data centers faster. They can have the capacity in place. And knowing that this tech is deflationary, I think that's kind of it. There's a tariff element to it, and then there's a fact that companies can actually be more profitable by implementing tech. We saw this in 2022 in the downturn when [quantitative tightening] started, software investment in many companies went up. They invested heavily in platforms that were either automation platforms, analytics platforms that could allow them to more efficiently make decisions while keeping head counts in place. And we actually saw from 2022 to 2024, Big Tech didn't really raise head counts, even though earnings grew considerably.

McCarty Carino: When it comes to share prices, I think a lot of people are sort of like playing a tiny violin for these companies with the biggest market caps in the world. The market caps are slightly smaller than they were, but still absolutely enormous. But, I mean, at a kind of basic level, why are capital markets important to any company, but especially to tech companies?

Newman: Well, I mean, there's a few different reasons capital markets are important. Of course, there's the literal ability to continually raise needed capital to run the business. These large companies don't have as much of that type of need. They're also a litmus test for how the market perceives a certain company or a certain category. And of course, it's also part of, at least as I see it, American exceptionalism, that the U.S. companies are seen as the world's most valuable companies. [The capital markets are] also full of sort of abnormal actions over short periods of time. But over long periods of time, the market does tend to be a very strong indicator for these companies and for the health of an economy and the health of businesses.

McCarty Carino: And for that reason, U.S. capital markets, and especially tech stocks, have been a good place to put money for investors all over the world. That is good for our companies that they attract investment. So what does it mean for tech companies for markets to potentially be in bear territory?

Newman: Well, for the tech companies, I think most of these, especially these Mag 7 and large tech companies, I think it really just means battening down the hatches, staying really focused, investing in the right [research and development], not overleveraging and continuing to serve the customers and deliver the innovation and solutions that has gotten them to where they're going. These large companies have incredible operating leverage. And you look at some of them, like Nvidia is supposed to create $100 billion in cash in the next year. Their share price dropping and their market cap going from $3.5 trillion to $2.5 trillion doesn't change their ability to function and operate. And I think these companies have strong [barriers to competition], they have strong customer bases, they have strong margins, and even in periods of recessions, they're generally growing their earnings. Now the expectation for earnings growth sometimes slows, but these companies have strong businesses that continue to grow. They continue to create cash flow. And I think over time, if you can handle the kind of the uncertainty and buy when things seem most uncomfortable, there's endless history and proof points that people that bought during these times do a lot better than those that sort of chase these names into bull markets.

McCarty Carino: We've been talking about Big Tech, but what are the kind of ripple effects for little tech, for startups in this kind of an environment?

Newman: There's a lot more risk for smaller companies and small tech. You got to watch for a signal. You know, we work with 600 of the world's largest tech companies. The signal that we look for as a smaller company working with many of the larger ones is, when does their spending slow down? Meaning, do you start to see meaningful behavior changes coming from your larger clients? Are they actually slowing their spending down? That signal is often one that smaller tech companies need to look at. You need to be on top of how technology can help. You need to be very focused on delivering great value to your existing customers and just listen to your large customers, because they will tell you. The large customers tend to know when they need to slow spending and when they start slowing spending, you need to slow spending for sure.

McCarty Carino: This isn't the first shock that the tech sector has weathered. In fact, the tech sector seems to have more of them than other industries. How would you sort of put this in perspective of the kind of history of ups and downs in the tech industry and what we can kind of learn from those?

Newman: We're going to go through cycles every handful of years. And actually, with the diffusion of innovation speeding up, and the diffusion of information speeding up, I actually think cycles happen at more rapid pace. But the one thing I think we all tend to underestimate is sort of the perseverance. You know, the human condition is we come back from adversity and we come back stronger. The tariffs obviously impact technology, but we will accelerate, and we will continue to innovate, and it will be technology that will get us out of these most difficult situations. It's proven time and time again. So owning the names in tech, it's very hard to bet against over the long term.