Amazon- and Alphabet-backed company Anthropic released updates to expand the capabilities of its Claude AI model earlier this month, sparking investor fears.Jonathan Raa/Reuters
A renewed slump in technology companies’ shares on Monday underscored continued concern among analysts and investors about potential market disruptions caused by the expanding use of artificial intelligence.
The S&P/TSX Capped Information Technology Index fell more than 3 per cent, taking its losses for the year to date to more than 20 per cent. That compares with a 2026 gain of nearly 6 per cent for the broader S&P/TSX Composite index.
The fall in Canadian technology shares tracked a wider U.S. markets’ slump that dragged the NASDAQ 100 Index down more than 1 per cent.
Global market sentiment was also hit by uncertainty around worldwide trade after U.S. President Donald Trump’s announcement on Saturday of higher global tariffs.
Mr. Trump said that he would place temporary 15-per-cent tariffs on other countries, up from a 10-per-cent rate he had announced Friday in response to a Supreme Court ruling that struck down his sweeping “reciprocal” tariffs on imports from around the world.
But analysts said heavy falls in technology names pointed more specifically to concerns about the end of an AI-fuelled stock-market rally.
Canadian tech stocks struggle as investors worry about the impact of AI
In a recent research note to clients, Elias Hilmer, markets economist at Capital Economics, said that a bursting AI bubble could see U.S. shares, measured by the MSCI USA Index, fall by 12.5 per cent by the end of 2027.
While the sell-off reflects real concern about new technologies upending established businesses, market experts say some selling has been overdone. In fact, those same technologies could potentially provide a boost to a Canadian market relatively insulated from disruption.
“Babies [are] being thrown out with the bathwater as this rolling sector attack happens,” said Craig Jerusalim, senior equities portfolio manager at CIBC, referring to sell-offs in recent weeks that have hit companies in industries as varied as software, trucking, real estate services and insurance.
Investor worries reached a fever pitch in January and early February when Amazon- and Alphabet-backed company Anthropic released updates that expanded the capabilities of its Claude AI model in software development and legal technology.
But calling the broad stock slump a “reverse meme,” Mr. Jerusalim said markets appeared to be gripped by “selling without the fundamental research backing it.”
“Just a mere whisper of AI disruption [is] triggering indiscriminate selling of these high-quality companies,” he said.
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Technology companies, and in particular those focused on software, are ripe for disruption as their shares have traded at very high multiples, said Denis Taillefer, senior portfolio manager at Caldwell Investment Management in Toronto.
“Software companies historically always had these fantastic moats, but AI is going to chip away at that quite significantly,” as even complex software becomes more easily replaced by AI agents, he said.
“If you can’t maintain that moat, then those premium valuations you had tied to that really will come under significant pressure, which is what we’re seeing now.”
But Mr. Taillefer said AI could even negatively impact companies seemingly well-insulated from direct effects. He highlighted the example of privately held financial data and media company Bloomberg LP, which could face pressure as the replacement of some analyst roles with AI reduces financial companies’ demand for its expensive licences.
“Is [Bloomberg] worth as much as you thought it was a few years ago, before AI started to show the type of impacts it could have?” he asked.
The task for portfolio managers, said Mr. Jerusalim, is identifying which companies will see their long-term values eroded, and where AI has the potential to increase productivity and margins. Investors are unlikely to glean much from current company metrics, though economists have pointed to indicators of rising U.S. productivity as an indication of AI’s effects.
“You’re not going to see the impact in the next few quarters unless you’re in the real eye of the storm,” he said, noting the risks for companies based around call centres and easily replicated software services.
Another difficulty is that high-quality companies that have been the subject of irrational selling may not yet be good investment targets. “Even if we’re right, we’re wrong at the moment,” he said.
“Those aren’t the ones that we’re necessarily chasing to be buying on this dip because, in many cases, the dip can last a lot longer than we expect,” Mr. Jerusalim added.
One potential upside for Canadian investors, said Mr. Taillefer, is that the Canadian economy is more heavily weighted than the U.S. toward companies that could see benefits, rather than disruptions, from the spread of AI tools.
He said he sees opportunities in areas such as utilities, natural resources, waste management, construction and supermarkets. Those are areas “where you will have some AI come into your business and help drive down costs or maybe improve sales … but the physical part of the business can’t be displaced.”
A broader worry for the Canadian economy may be less the scale of potential disruption, which Mr. Taillefer said has historical parallels, than its speed.
“Usually … the impact [a new technology] has would tend to be stretched over a longer time frame, so there’s a little less friction in people being displaced and having to find new areas in the economy to retrain and redevelop.”
“Our concern here is just that this can happen probably at a quicker pace and have a bigger impact on the work force.”