AI Stocks Face 'Show Me' Moment As Trump Tariff Drama Plays Out

Is the artificial intelligence stock market boom still wired or tired amid the emergence of China's DeepSeek? Top AI stocks such as Microsoft (MSFT) and Nvidia (NVDA) face high expectations. For many companies — such as Google parent Alphabet (GOOGL), Amazon.com (AMZN) and Facebook parent Meta Platforms (META) — the rise of generative AI poses both risk and opportunity.

Amid the rise of generative AI — which generates text, images, and video — it's a good time to be cautious amid the hype, especially given recent developments at Super Micro Computer (SMCI).

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Many companies suddenly tout AI product roadmaps. In general, look for AI stocks that use artificial intelligence to improve products or gain a strategic edge.

Nvidia Retreats On Trump Move

Meanwhile, Nvidia stock is now down 24% in 2025.

A bellwether for AI stocks, chip maker Nvidia sold off after the Trump administration effectively barred the company from selling its custom artificial intelligence processors to customers in China. The U.S. government is now requiring it to get an export license to sell its H20 processor in China and other restricted countries. The move will force the AI chip leader to write off up to $5.5 billion in inventory and purchase commitments in its fiscal first quarter.

Meanwhile, Nvidia hosted its GTC Conference in mid-March.  For Nvidia, margin pressure has been a key issue as it ramps up production of next-generation Blackwell AI chips in 2025. At GTC, Nvidia also updated its AI accelerator roadmap.  However, whether customers will really need "Rubin Ultra" GPUs in 2027 and "Feynman" GPUs in 2028 remains a big question.

The initial public offering of Nvidia-backed CoreWeave (CRWV) has been volatile. CoreWeave is a new AI cloud services provider that rents out Nvidia GPU-equipped servers.

In 2023 and 2024, semiconductor plays out-performed software companies as the best AI stocks. Investor interest in data center infrastructure stocks has cooled off in 2025. Nvidia and many other AI chip stocks are in the red.

What's clear is that AI stocks are under more scrutiny.

"We expect AI to transition from a 'tell me' to a 'show me' story, with any disconnect between investments and revenue generation to come under increased scrutiny," said a Bank of America report.

AI Stocks: Model Battle Heats Up

Meanwhile, ChatGPT-maker OpenAI was valued at $300 million as part of a new $40 billion fundraising round led by SoftBank. OpenAI builds large, multimodal foundation models. The OpenAI funding round was good news for infrastructure AI stocks because OpenAI has plenty capital for future data center build-outs.

Investors should keep a close watch on the fierce competition in AI models. One view is that competition between U.S. and open source AI models from DeepSeek and others would heat up amid a U.S.-China trade war.

In a post on April 4, OpenAI's chief executive Sam Altman noted plans to release GPT-5 in "a few months." He added that it is much better than "we originally thought."

Meta on April 5 released the first member of its open source Llama 4 AI model family. Meta said the most powerful Llama 4 model,  Llama 4 Behemoth, is still in training.

Google recently released Gemini 2.5 while Anthropic continues to upgrade its Claude family of AI models. Then, there's Elon Musk' xAI startup with its Grok models.

Safe Superintelligence Inc., co-founded by former OpenAI chief scientist Ilya Sutskever, has raised $2 billion at a valuation of $32 billion, said a report. Greenoaks, Lightspeed Venture Partners and Andreessen Horowitz took part in the funding round.

Meanwhile, China-based DeepSeek is readying the next version of its controversial open-source models. Generally, the AI models are battling in reasoning capabilities and other performance yardsticks as well as computing power needs.

Here's IBD's take on the key questions involving DeepSeek, including U.S./China competition in artificial intelligence. Meanwhile, Alibaba Holdings (BABA) has its Qwen AI models and Baidu (BIDU) has Ernie AI models.

Palantir Stock Out-Performs Software Peers

What's more, data analytics software maker Palantir (PLTR) recently hosted its sixth AI event. PLTR stock has gained 24% in 2025 after soaring 340% last year.

Palantir — as well as Snowflake and privately held Databricks — are focused on helping companies use proprietary data to build their own AI models. Here's a look at Databrick's strategy.

In an IBD interview, ServiceNow (NOW) Chief executive Bill McDermott explained about how the enterprise software maker aims to be an AI winner.

Meanwhile, software maker Salesforce (CRM) reported Q4 earnings that disappointed. The software maker's fiscal 2026 outlook came in light even though it's ramping up new AI agents.

The commoditization of AI models could spur application development. While "training" AI models has been the biggest driver of capital spending, the market will shift to "inferencing," or running AI applications, in the long run.

Having struggled to generate new revenue from "copilots," software companies are now turning to autonomous, goal-driven AI agents. One big issue for software companies is how fast customers ramp up pilot programs to commercial deployment.

AI Stocks: Meta Sets Llama Conference

Meanwhile, Meta stock has dipped 14% in 2025. Further, Meta will host its first developer conference, called LlamaCon, on April 29. The event will showcase Meta's open-source AI model ecosystem and its Llama series of models.

At the event, Meta could release its own AI-driven search engine, posing a new worry for Google.

Further, Meta AI now has over 700 million monthly average users , and management believes it is now the No. 1 leading AI assistant. Meta expects to reach 1 billion users in 2025. With AI, the social media giant plans to deliver more personalized and relevant responses for users across apps, including Thread.

Amid worries over capital spending, Google stock is down 20% in 2025.

One worry for Google is startup OpenAI, which now claims ChatGPT serves 400 million weekly active users, up from 300 million in December 2024. OpenAI has not disclosed figures for paid consumer subscriptions. Its enterprise usage figure has doubled since September 2024, reaching 2 million paying business users.

U.S. Chip Export Restrictions A Wild Card

Among AI stocks to watch, Apple (AAPL) has lagged in 2025. Apple stock has shed 21%.

The big question has been whether Apple Intelligence features in iPhone 16 models will spur a big upgrade cycle. Based on Apple's December quarter results, a big AI-driven upgrade cycle has not yet kicked in. And, voice assistant Siri has yet to be upgraded with advanced AI technology.

The 2025 capital spending plans of cloud computing giants remain robust.

But AI chip export restrictions remain a wild card on Nvidia stock as well as Advanced Micro Devices (AMD).

On the earnings front, Broadcom (AVGO) reported fiscal Q1 results on March 6. Broadcom stock popped on its AI chip demand outlook. Broadcom makes custom AI chips for cloud computing titans.

Qualcomm (QCOM), ARM Holdings (ARM), and Marvell Technologies (MRVL) are other AI chip makers to watch.

Among other data center infrastructure plays, Arista Networks (ANET) reported fourth-quarter earnings and revenue that topped Wall Street targets. Full year 2025 revenue guidance for Arista stock underwhelmed.

Microsoft is the biggest investor in generative AI leader OpenAI, having spent some $14 billion on the startup. But Oracle will now be a big provider of data center capacity to OpenAI for training AI models.

Most of Microsoft's new AI revenue comes from its cloud computing business, not software upgrades.

Also, AI technology uses computer algorithms. The software programs aim to mimic the human ability to learn, interpret patterns and make predictions.

Until recently, machine learning was largely limited to models that processed data to make predictions. The AI models focused on pattern recognition from existing data. Corporate spending on AI projects was modest as companies mulled return on investment.

AI Stocks To Watch By Industry Group

New generative AI models process "prompts," such as internet search queries, that describe what a user wants to get. Generative AI technologies create text, images, video and computer programming code on their own.

Companies will aim to boost productivity by developing customized AI for specific industries. Proprietary company data will be used to train AI models.

AI systems require massive computing power to find patterns and make inferences from large quantities of data. So the race is on to build AI chips for data centers, self-driving cars, robotics, smartphones, drones and other devices.

For chipmakers, analysts expect a market for "edge AI" — on-device processing of AI apps to emerge.

Will AI Startups Challenge Tech Giants

What's more, one key question for investors is whether tech industry incumbents will be the big generative AI winners. Or, will a new wave of AI startups eventually dominate? OpenAI has told employees its now on an annual revenue run-rate of $3.4 billion, up from $2 billion in January.

Further, OpenAI recently laid out more details of its plans to adopt a for-profit business structure in 2025.

Large language models provide the building blocks to develop applications. Further, LLMs help AI systems understand the way that humans write and speak. Also, LLMs require training data for specific tasks. Companies with access to troves of data hold an edge.

OpenAI is part of a wave of LLM startups that includes AI21 Labs, Anthropic and Cohere.  Anthropic's latest funding round values it at $61.5 billion.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.

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