The Open for Thursday, Feb. 26, 2026

Key Concepts

• Canadian banks reported strong Q1 earnings, though valuations are high.
• The TSX is at a record high, but a trend of Canadian companies going private may be reversing.
• NVIDIA’s performance is strong, but data centre expansion faces logistical challenges.
• Quebecor is disrupting the Canadian telecom market with strong subscriber growth.
• Actively managed ETFs are gaining popularity in Canada.
• Deteriorating infrastructure is a growing financial burden for Canadians.
• A “bi-global trade” dynamic is emerging, potentially benefiting Canada.

Canadian Bank Earnings & Market Performance

TD Bank, CIBC, and Royal Bank of Canada (RBC) all exceeded Q1 earnings expectations, with TD reporting record revenue in Canada driven by loan/deposit growth and wealth management. CIBC posted record revenue across all units and a higher Return on Equity (ROE), marking its second consecutive quarter of beating estimates. RBC’s earnings were strong, but the stock experienced selling pressure due to slightly elevated loan loss provisions. Overall, Canadian banks demonstrate strong performance with healthy capital ratios and cost controls, though valuations are high relative to historical averages, fueled by a “buy Canada” trade. The TSX closed at a record high, boosted by higher gold prices, and is currently up 35% (excluding dividends) in the past year. A trend of smaller and medium-sized Canadian companies being taken private is potentially reversing, as evidenced by recent IPOs like Apotex.

Tech Sector: NVIDIA & Data Centre Challenges

NVIDIA reported a revenue jump of over 70% in the latest quarter with 75% margins, but the stock saw a muted reaction due to concerns about future growth. While NVIDIA’s fundamentals remain strong, the primary concern centers on the logistical challenges of scaling data centre infrastructure. Approximately $98 billion in data centre projects are currently blocked due to local opposition in the US (Virginia, Arizona) stemming from concerns about electricity bills and water usage. This “bear case” isn’t NVIDIA’s performance, but the ability to physically expand capacity to meet demand. The segment highlighted a shift in investment focus from core AI names to identifying the next beneficiaries and those being disrupted by AI.

Corporate News & Stock Specifics

Equinox and the Canada Pension Plan Investment Board (CPPIB) are nearing a $4 billion USD deal to acquire AT North Holding, an Iceland-based data centre operator. Gilden Activewear posted sales and profit beats but lowered its full-year forecast. Stellantis shares rose after the CEO signaled improved North American returns. Quebecor is outperforming competitors in the Canadian telecom market, adding 74,000 wireless subscribers compared to approximately 40,000 for Bell, Telus, and Rogers combined. Quebecor’s wireless service revenue growth is 9% compared to flat growth for competitors, and its RPU (Revenue Per User) is up 1.4% while competitors are seeing declines. Dell was mentioned as a potential value play with a PE ratio of 12x and a yield of almost 2%.

Broader Market Trends & Investment Strategies

The average stock in the S&P 500 has experienced a 10% move, despite the index trading at a high, suggesting potential for resolution in the next 2-4 years. A “bi-global trade” is occurring, with Canada potentially benefiting from capital flows before the US. Macroeconomic factors, particularly the resolution of the Kuzma/USMCA negotiations, are crucial for continued market growth. There’s a growing trend of actively managed ETFs, particularly in Canada, where they now represent over 30% of ETF assets (totaling $730 billion). Nearly $20 billion of ETF flows went into international ETFs in Canada last year, doubling the previous three years combined. Capital Group launched a suite of active ETFs in Canada in October 2024. GE Asset Management is shifting towards a more global equity allocation, finding valuations more attractive outside the US.

Infrastructure & Consumer Impact

Deteriorating infrastructure in Canada is creating a financial burden for consumers. CAA members in Ontario and Manitoba pay an average of $900 per pothole incident. Toronto has repaired 23,000 potholes year-to-date, compared to 33,000 for the entire last year, highlighting the growing problem. This underscores the need for government investment in infrastructure.

Conclusion

The Canadian market demonstrates strength, particularly in the banking and telecom sectors, but faces challenges related to high valuations and infrastructure limitations. While NVIDIA’s fundamentals remain robust, logistical hurdles in data centre expansion pose a risk to future growth. The increasing popularity of actively managed ETFs and a shift towards global equity allocation suggest evolving investment strategies. Ultimately, navigating the current market requires a nuanced understanding of both macroeconomic trends and sector-specific dynamics, alongside a recognition of the need for sustained infrastructure investment.