North American equity markets diverged this week, with the S&P 500 ending in positive territory. Investors shrugged off technology-driven volatility and rising bond yields after the US Federal Reserve opted to hold interest rates unchanged. The TSX Composite closed slightly lower but was cushioned by its information technology sector, led by strong quarterly results from Celestica and renewed support for Constellation Software.

However, mounting skepticism surrounding the AI spending boom has triggered a broader global technology sell-off, pulling Korea’s KOSPI index and the Nasdaq down 30% and 8.1%, respectively, from their June peaks.

Telus shares declined last week after reporting results that fell below market expectations. Highlights of results include a 55% cut to its dividend to a quarterly rate of $0.1875 per share dropping its yield to 5.5%. Former CIBC CEO Victor Dodig recently accepted the leadership position at Telus as long time Telus CEO Darren Entwistle stepped down. 

Earnings from four of the Magnificent Seven giants dominated corporate headlines. Apple shares fell 7.4% following a subdued revenue growth forecast caused by severe supply chain constraints for advanced chips and memory components. Although iPhone sales rose 22% and Mac sales jumped 29%, decelerating growth in higher-margin Services concerned investors. CEO Tim Cook noted that Big Tech’s massive data centre buildout is straining semiconductor supplies, raising fears that recent device sales were a temporary pull-forward ahead of expected price hikes.

Market reactions across the remaining technology titans were divided. Microsoft shares surged 15.5% as enterprise adoption of M365 Copilot helped drive stronger-than-expected cloud growth of 43%, while a restrained capital expenditure outlook and robust revenue guidance eased cash flow fears. Amazon shares gained 15.3% after a 37% surge in AWS cloud sales, marking its fastest growth in 18 quarters. This performance, alongside strong bookings through 2027 helped justify raising its annual capital expenditure budget to U.S. $220 billion. 

Conversely, Meta tumbled 8.0% as heavy AI infrastructure outlays drove a 91% drop in free cash flow, while capital expenditure guidance was narrowed toward the higher end of its range. Lacking a dedicated cloud division to commercialize its data centre buildout, Meta's vague plan to lease excess capacity left investors skeptical.

These contrasting market reactions across Microsoft, Amazon, and Meta demonstrate that investors are favouring cloud leaders capable of immediately converting soaring AI capital expenditures into accelerating enterprise revenue, while penalizing platforms whose heavy outlays erode free cash flow without near-term returns.