A new Chinese model revives the bubble jitters and drags the TSX down before Monday's inflation read
A deepening retreat from artificial-intelligence stocks pushed a closely watched gauge of US chipmakers into a bear market on Friday and pulled Canada's main index lower alongside Wall Street.
The Philadelphia semiconductor index fell 1.6 percent, its third straight daily loss, leaving it 20 percent below the record close it set on June 22, according to Reuters.
Bloomberg reported the drop met the technical threshold for a bear market.
The index lost about 10 percent over the week, its worst week in more than a year, CNN said, though it remains up 65 percent for 2026.
Canada's S&P/TSX composite index closed down 76.30 points at 35,263.85, with technology the heaviest drag, the Canadian Press reported.
Steve Locke, chief investment officer for fixed income and multi-asset strategies at Mackenzie Investments, said the global technology cycle had fed into Canadian tech names, though he characterized the move as minor volatility.
The latest leg lower followed the debut of a new model from Chinese startup Moonshot AI.
The company said its Kimi K3 system was the world's largest open-weight AI model and delivered performance close to Anthropic's frontier model, as per Reuters; CNN reported it nears the capability of Anthropic's Claude Fable 5.
Analysts drew comparisons to January 2025, when China's DeepSeek rattled markets with a low-cost model.
Cheaper open-source competitors threaten the subscription revenue of US AI developers and, in turn, demand for the chips underpinning the buildout, CNN noted.
Nvidia was the single heaviest weight on the S&P 500, falling 2.2 percent.
Its market value briefly dropped to as low as US$4.85tn, slipping below Apple's, before recovering to finish the session as Wall Street's most valuable company.
Memory and storage names led the broader decline; Micron has fallen about 30 percent since a late-June record but still holds a gain of nearly 200 percent for the year, CNN reported.
The S&P 500 fell 1 percent to 7,457.69, the Dow Jones Industrial Average dropped 406.55 points, or 0.77 percent, to 52,146.42, and the Nasdaq composite lost 1.40 percent to close at 25,520.24.
For the week, the S&P 500 shed 1.55 percent, the Nasdaq 2.9 percent and the Dow 0.93 percent, per Reuters.
Oil added to the pressure.
Brent crude, the international benchmark, jumped 4.6 percent to settle at US$88.10, its highest level since June 11 and up from roughly US$76 a week earlier, CNN reported.
West Texas Intermediate rose about 4.5 percent to US$82.49.
The gains followed an expanded US airstrike campaign against Iran that hit bridges and collapsed a tower at a key Iranian port, renewing worries over crude shipments through the Strait of Hormuz.
Rising prices lifted the TSX energy sector, Locke said.
Attention now turns to Canadian inflation data due today, Monday, from Statistics Canada.
A Reuters poll of economists expects the annual rate cooled to 2.9 percent in June from 3.2 percent in May, according to LSEG Data & Analytics, helped by falling gas prices.
Locke said inflation on the core side had run close to the Bank of Canada's roughly 2 percent target.
"The inflation story is not quite as hard to manage here for the Bank of Canada," he said, adding that the renewed climb in oil could complicate July's figures.
Views diverged on whether the selloff marks a buying opportunity.
Jake Seltz, portfolio manager at Allspring Global Investments, said investors had grown uneasy about AI spending and bubble risk, telling Bloomberg, "Ultimately, we need to see a re-acceleration in revenue."
He said he would treat any weakness as a chance to add to positions, arguing the cycle still has "a couple more years of great returns" ahead.
Sameer Samana of Wells Fargo Investment Institute struck a similar note, writing that markets "were just looking for any excuse to sell" and that Chinese competition was not new.
The next two weeks bring earnings from the biggest AI spenders, whose results Bloomberg said investors will comb for evidence the outlays are paying off.
Tesla and Alphabet report Wednesday, followed by Microsoft, Meta, Apple and Amazon, with Nvidia due later next month.
Alphabet's capital spending is projected to more than double this year to US$187bn while Alphabet, Microsoft, Amazon and Meta have together guided to as much as US$725bn in capital expenditures for the year.
The Canadian dollar traded at 71.36 cents US, up from 71.24 cents US on Thursday.
The August gold contract rose US$26.70 to US$4,018.80 an ounce.
