Table of Contents

Market Context
What Happened
Why It Matters
Sector Breakdown
Risks to Watch
What to Watch Next
Final Outlook

Market Context

Growth and technology stocks on the TSX have spent recent weeks riding a wave of enthusiasm tied to global AI infrastructure spending, culminating last week in South Korean memory chipmaker SK Hynix’s $26.5 billion Nasdaq listing, the largest-ever first-time U.S. stock sale by a foreign company. That enthusiasm is being tested this week by a very different kind of story: a weekend escalation in the U.S.-Iran conflict that has sent oil prices sharply higher and triggered a broad pullback in risk assets, including technology stocks, across global markets.

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What Happened

SK Hynix shares, which surged as much as 13% on their Wall Street debut Friday, slumped roughly 10.6% in Seoul trading Monday as investors booked profits and reassessed second-quarter earnings risk alongside broader market volatility. South Korea’s Kospi index fell sharply as a result, while Japan’s Nikkei 225 dropped more than 1%. In the U.S., Nasdaq Composite futures lost roughly 1% Monday morning, with S&P 500 and Dow futures also lower, as the renewed Strait of Hormuz conflict weighed on global risk appetite. On the TSX, growth-oriented names including Shopify and Constellation Software had rallied last week on spillover enthusiasm from the SK Hynix listing and broader AI infrastructure sentiment, gains that now face a test as that same global sentiment turns more cautious to start this week.

Why It Matters

AI infrastructure enthusiasm and macro risk appetite are increasingly intertwined. Last week’s rally in Shopify and Constellation Software showed how directly Canadian growth names can benefit from global AI sentiment, but SK Hynix’s sharp Monday reversal is a reminder that the same sensitivity works in both directions when broader risk appetite shifts.

Valuation risk becomes more pronounced during risk-off periods. Growth stocks trading on elevated multiples, reflecting expectations of substantial future earnings growth, tend to see outsized moves when investors broadly reduce risk exposure, regardless of company-specific fundamentals.

Sector Breakdown

Within Canadian technology, Shopify and Constellation Software remain the most directly exposed to shifts in global AI and chip-sector sentiment, given how closely their recent gains tracked the SK Hynix-driven rally. Elsewhere in the growth space, companies pursuing more speculative, longer-horizon opportunities, such as Xanadu Quantum Technologies in photonic quantum computing, tend to be even more sensitive to broad risk appetite than established platform companies, since their valuations rest more heavily on distant future outcomes. AI infrastructure investment itself, including Meta’s recently announced Alberta data centre, continues to represent a structural growth theme for the sector, even as near-term sentiment fluctuates with macro headlines.

Risks to Watch

The most immediate risk is that this week’s risk-off tone, driven by the oil shock and rising bond yields, extends further and pressures growth stock valuations broadly, given their sensitivity to both interest rate expectations and general market sentiment. SK Hynix’s sharp reversal also raises the question of whether last week’s AI infrastructure enthusiasm ran ahead of fundamentals, a dynamic that could affect sentiment toward Canadian AI-adjacent names even where their own fundamentals haven’t changed. Rising government bond yields, with the U.S. two-year note at its highest level since February 2025, pose an additional headwind for growth stocks generally, since higher rates increase the discount applied to future earnings.

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What to Watch Next

Investors should watch how SK Hynix and broader chip-sector sentiment trade through the week, given the direct read-through to Shopify and Constellation Software. Tuesday’s U.S. CPI report and the Federal Reserve’s broader policy tone will also matter significantly for growth stock valuations, given their sensitivity to interest rate expectations. The start of second-quarter earnings season this week should offer a clearer signal of whether AI-related revenue growth can support current valuations despite the more cautious macro backdrop.

Final Outlook

Canadian growth and technology stocks enter this week facing a genuine test of whether last week’s AI infrastructure enthusiasm can withstand a broader risk-off shift driven by geopolitical and monetary policy uncertainty. The underlying AI investment theme remains intact, but near-term volatility looks likely given how quickly sentiment reversed in Asian markets Monday.