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Canada's TSX rides oil higher while U.S. tech falters on AI doubts
West Texas Intermediate crude settled at $73.21 on Thursday, its highest close in three months. That number explains most of what happened in equity markets across the border that day.
Canada's S&P/TSX Composite Index climbed 0.4%, riding energy stocks higher as oil prices extended their rally. The energy sector added 1.4% on gains across the majors, Cenovus, Suncor, Canadian Natural Resources all posting green by the close. When crude moves, the TSX moves. It's been that way since the index launched, and Thursday was no exception.
South of the border, the S&P 500 dropped 0.5% and the Nasdaq slid 0.9%. The culprit wasn't rate concerns or a sudden flight to safety. It was DeepSeek.
When a Chinese lab breaks a tech narrative
DeepSeek, a relatively unknown AI research lab out of China, released a new large language model this week that reportedly matches the performance of U.S. frontier models at a fraction of the training cost. The implications landed hard. If DeepSeek's claims hold up, and early tests suggest they might, then the argument that OpenAI, Anthropic, and Google have an insurmountable moat in AI infrastructure starts to crack.
Nvidia took the brunt of it. The stock fell 3.2% on Thursday alone, dragging the broader tech sector down with it. Investors who spent the last 18 months pricing in multi-decade dominance of AI compute infrastructure suddenly had a new scenario to consider: that the capital expenditure arms race might not be the only path to state-of-the-art models. DeepSeek reportedly trained its system on older, less expensive hardware and still matched GPT-4-level benchmarks.
That's not a minor development. It suggests the returns to throwing another $10 billion at training runs might be diminishing faster than the hyperscalers expected.
The resource/tech split widens
The TSX and the S&P 500 have tracked each other loosely for years, with correlation dipping during commodity super-cycles and tightening when both economies are grinding through the same macro conditions. But over the last six months, the divergence has widened again. The TSX is up roughly 8% since October. The S&P 500 is up 12%, but strip out the Magnificent Seven tech names and it's a flatter picture. Canada's index doesn't have that concentration risk because it doesn't have those names. What it has is oil, banks, and miners.
When oil rallies, as it has since early January on tighter supply signals from OPEC+ and stronger-than-expected demand out of China, the TSX benefits directly. Roughly 16% of the index weight sits in energy. For the S&P 500, energy is under 4%. The mechanical result is that a $5 move in WTI has outsized impact in Toronto and gets absorbed as noise in New York.
Thursday's session made that asymmetry visible. Energy gains in Canada more than offset weakness in financials and materials. In the U.S., no sector was large enough or strong enough to absorb the tech selloff. The Nasdaq finished near session lows.
The broader story here isn't that Canada outperformed on a single day. It's that the two markets are now running on different fuel. One is powered by the AI infrastructure build-out and its second-order effects across software, semiconductors, and cloud. The other is powered by global commodity flows, central bank policy, and whatever OPEC decides to do with production cuts. Those two engines don't move in sync, and this week they moved in opposite directions.
West Texas Intermediate crude settled at $73.21 on Thursday, its highest close in three months. That number explains most of what happened in equity markets across the border that day.
Canada's S&P/TSX Composite Index climbed 0.4%, riding energy stocks higher as oil prices extended their rally. The energy sector added 1.4% on gains across the majors, Cenovus, Suncor, Canadian Natural Resources all posting green by the close. When crude moves, the TSX moves. It's been that way since the index launched, and Thursday was no exception.
South of the border, the S&P 500 dropped 0.5% and the Nasdaq slid 0.9%. The culprit wasn't rate concerns or a sudden flight to safety. It was DeepSeek.
When a Chinese lab breaks a tech narrative
DeepSeek, a relatively unknown AI research lab out of China, released a new large language model this week that reportedly matches the performance of U.S. frontier models at a fraction of the training cost. The implications landed hard. If DeepSeek's claims hold up, and early tests suggest they might, then the argument that OpenAI, Anthropic, and Google have an insurmountable moat in AI infrastructure starts to crack.
Nvidia took the brunt of it. The stock fell 3.2% on Thursday alone, dragging the broader tech sector down with it. Investors who spent the last 18 months pricing in multi-decade dominance of AI compute infrastructure suddenly had a new scenario to consider: that the capital expenditure arms race might not be the only path to state-of-the-art models. DeepSeek reportedly trained its system on older, less expensive hardware and still matched GPT-4-level benchmarks.
That's not a minor development. It suggests the returns to throwing another $10 billion at training runs might be diminishing faster than the hyperscalers expected.
The resource/tech split widens
The TSX and the S&P 500 have tracked each other loosely for years, with correlation dipping during commodity super-cycles and tightening when both economies are grinding through the same macro conditions. But over the last six months, the divergence has widened again. The TSX is up roughly 8% since October. The S&P 500 is up 12%, but strip out the Magnificent Seven tech names and it's a flatter picture. Canada's index doesn't have that concentration risk because it doesn't have those names. What it has is oil, banks, and miners.
When oil rallies, as it has since early January on tighter supply signals from OPEC+ and stronger-than-expected demand out of China, the TSX benefits directly. Roughly 16% of the index weight sits in energy. For the S&P 500, energy is under 4%. The mechanical result is that a $5 move in WTI has outsized impact in Toronto and gets absorbed as noise in New York.
Thursday's session made that asymmetry visible. Energy gains in Canada more than offset weakness in financials and materials. In the U.S., no sector was large enough or strong enough to absorb the tech selloff. The Nasdaq finished near session lows.
The broader story here isn't that Canada outperformed on a single day. It's that the two markets are now running on different fuel. One is powered by the AI infrastructure build-out and its second-order effects across software, semiconductors, and cloud. The other is powered by global commodity flows, central bank policy, and whatever OPEC decides to do with production cuts. Those two engines don't move in sync, and this week they moved in opposite directions.
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