North American equity markets diverged last week as the S&P 500 fell under the weight of rising bond yields and poor earnings reactions from Alphabet (Google) and Tesla. Conversely, the TSX Composite closed slightly higher, lifted by a surge in the materials sector due to higher precious metals prices. The energy sector followed close behind as WTI crude oil prices crossed US$90 per barrel amid the escalating US-Iran conflict and a new Houthi embargo on Saudi exports through the Bab el-Mandeb Strait—a chokepoint handling 12% of global oil shipments in 2023, per the US Energy Information Administration (EIA). The resulting rally also drove the energy sector to lead the S&P 500.

Adding to local anxieties, the US announced plans to impose a new 50% tariff on many Canadian goods over alcohol and dairy disputes. While key exports like energy, potash, and critical minerals are exempt, the levy coincides with President Trump replacing expiring temporary duties with new 10% to 12.5% tariffs covering 99.4% of US trade. This renewed protectionist stance injects fresh uncertainty into cross-border supply chains.

Market sentiment turned critical of multi-billion-dollar AI buildouts. Tesla shares tumbled 14.5% after missing profit estimates and reporting its first quarterly negative cash flow in over two years. Despite record vehicle deliveries spurred by higher fuel prices, Tesla's core auto business struggled under lower selling prices, rising competition, and shrinking regulatory credit revenue. Meanwhile, capital expenditures more than doubled versus the same quarter last year as CEO Elon Musk accelerated investments in Full Self-Driving, robotaxis, and humanoid robots. With annual capital expenditure projected to surpass US$25 billion and the CFO warning that negative free cash flow will deepen in the second half, investors increasingly questioned how fast these massive AI bets can be monetized while core margins shrink.

Similarly, Alphabet shares fell 7% after posting negative free cash flow for the first time in the company’s history and expanding its 2026 capital expenditure budget by US$15 billion to a staggering US$195–$205 billion. Record Google Cloud growth was overshadowed by mounting infrastructure expenses and delayed rollouts of its Gemini 3.5 Pro model. With CEO Sundar Pichai acknowledging gaps in AI coding tools as compute resources shift to training Gemini 4, the historic cash burn amplified market alarm.

Together, Tesla and Alphabet signal a broader market inflection point where aggressive AI capital expenditures are pushing Big Tech into unprecedented cash drains, leaving investors notably impatient to see these investments turned into profits.