The technology sector is facing a period of heightened uncertainty as inflation and trade policies create new obstacles for industry leaders such as Meta and Alphabet. These companies, which generate a significant portion of their revenue through digital advertising, are under pressure as businesses cut marketing budgets and global trade tensions threaten international partnerships.

The impact of inflation on digital advertising is becoming increasingly apparent. As corporate spending tightens, digital ad budgets are among the first areas to be reduced. Reports indicate that U.S. digital ad spending growth is expected to slow to 9.1 percent in 2025, compared to 13.8 percent in the previous year. Internationally, growth is projected to decline from 14.5 percent in 2024 to 11.5 percent in 2025. This slowdown suggests potential difficulties for Meta and Alphabet, both of which rely heavily on advertising revenue.

The situation is further complicated by rising inflation rates. The most recent inflation report, released in January 2025, indicated a faster-than-expected increase in prices, which has raised concerns among consumers and corporations. Additionally, the University of Michigan’s Consumer Sentiment Survey revealed that inflation expectations have reached their highest levels since late 2023.

Trade policies are adding to the uncertainty. President Donald Trump’s announcement of a 10 percent tariff on Chinese imports in February 2025 has led to retaliatory measures from China. This dispute could impact Meta and Alphabet, both of which generate revenue from Chinese advertisers. Meta, for example, received 11 percent of its 2024 revenue from Chinese businesses, including major e-commerce companies like Temu and Shein. Google, on the other hand, earned 7 percent of its ad revenue from Chinese advertisers, primarily through search ads. Any reduction in advertising spending by Chinese companies could have a noticeable effect on their earnings.

Despite these challenges, both Meta and Alphabet are implementing strategies to maintain growth. Meta is putting a stronger emphasis on artificial intelligence-driven advertising solutions, including automated ad creation and personalized targeting. The company is also working on monetizing its expanding platforms, such as WhatsApp and Threads, which have yet to produce substantial ad revenue. Another area of focus is Reels, Meta’s short-form video feature, which has gained traction among advertisers. A recent survey showed that 56 percent of ad buyers preferred Reels in 2025, a significant increase from 41 percent the previous year. The company anticipates Reels generating $28 billion in revenue by the end of 2025, with a projected annual growth rate of 24 percent through 2029.

Alphabet is also refining its approach by integrating AI innovations into Google Search to drive ad demand. However, the company faces challenges in monetizing AI-generated search results while sustaining advertiser trust. Despite these concerns, Google Search ads remain a popular choice among marketers due to their high return on investment and advanced analytics capabilities.

Investors are closely watching how Meta and Alphabet navigate these changes. The CNBC Investing Club recently sold a portion of its Meta stock after a 17-session rally that resulted in a 17 percent gain, primarily as a risk management strategy rather than a lack of confidence in the company. Although the club reduced its holdings, Meta remains one of its preferred long-term stocks, having delivered a 240 percent return since April 2022. Prominent market analysts, including Jim Cramer, continue to assess both companies’ ability to adapt and grow despite economic headwinds.

Meta and Alphabet continue to dominate the digital advertising industry, collectively holding 60 percent of global market share. However, inflation and trade-related uncertainties pose significant challenges. Both companies are betting on AI-driven solutions and platform expansion to sustain their leadership. The key question for investors is whether these tech giants can maintain their dominance and weather the economic turbulence ahead.