Last week, the TSX Composite and the S&P 500 retreated from record highs as AI momentum collided with resurgent interest rate fears. The reversal was triggered by blowout employment reports in both Canada and the US, which rattled investors and reignited concerns that prolonged high rates could stifle economic growth. Consequently, precious metals tumbled, causing the materials sector to act as a severe drag on the TSX. In the US, these rate and growth anxieties caused the consumer staples and information technology sectors to lag the S&P 500.

The AI infrastructure boom is expanding beyond chipmakers into hardware assembly and systems networking. Hewlett Packard Enterprise (HPE) shares skyrocketed 19.5% following a massive second-quarter earnings beat. Management noted that agentic AI is accelerating demand, driving triple-digit growth in traditional server orders as enterprises modernize their compute infrastructure for AI inferencing (running AI models to make predictions). The euphoric sentiment in the semiconductor space was further underscored when Nvidia’s CEO predicted Marvell Technology will be the next US$1 trillion company, sending Marvell's stock surging 32.5% in a single day. However, the market is punishing companies that fall short of lofty expectations. Broadcom shares tumbled 12.6% after infrastructure software sales disappointed and the company failed to raise its full-year AI revenue guidance. This correction came despite revenue jumping 48% from a year ago and AI-related sales more than doubling on robust custom chip demand from cloud giants. Investors were also deterred by Broadcom's strategic shift to offer only standalone chips rather than fully integrated AI systems. Meanwhile, Alphabet (Google) shares dropped 3.9% after announcing a staggering US$80 billion equity raise to fund its AI buildout, adding to the more than US$85 billion in debt raised over the past year. 

A wave of blockbuster initial public offerings (IPOs) is poised to reshape public markets. In Canada, generic drugmaker Apotex aims to raise up to $1.2 billion, signalling a potential IPO revival for the TSX after a multi-year listings slump. In the US, Elon Musk’s SpaceX is targeting a roughly US$1.77 trillion valuation, marking the largest IPO in history. Adding to the enthusiasm, Claude AI creator Anthropic confidentially filed for an IPO and was most recently valued near US$1 trillion after raising US$65 billion in its latest fundraising round. The company is front-running an expected filing from ChatGPT creator OpenAI. These high profile market debuts, which are not immediately included in major benchmark indices, are pressuring index providers to fast-track their inclusion frameworks. For example, the NASDAQ previously required months of observation and has reduced the inclusion period to only 15 days as long as certain criteria are met. What this means for investors is many passive ETFs that track the NASDAQ will be forced to buy these new listings at an earlier date. However, S&P Dow Jones Indices announced it will maintain its existing eligibility requirements for now.

In retail, Lululemon shares fell 8.6% after the company slashed its full-year earnings guidance, citing negative media and weak reception to new product launches. Profitability is also under pressure, with gross margins contracting 4.1 percentage points due to higher US tariffs, a lost shipping exemption, and discounting. Though a new CEO has been hired, investors remain cautious as competition in the athleisure segment increases with companies like Alo and Vuori taking market share.