BUSINESS
Canadian tech stocks are getting hammered
And it has more to do with their clients' business than where they are based.
The stock market is a stressful place for any company to be right now, but Canadian tech firms are having a particularly rough go of it.
Shopify, Lightspeed, OpenText, and BlackBerry have all underperformed compared to the rest of the TSX so far this year, and their U.S.-listed stocks have faced steeper drops than many of their Big Tech counterparts south of the border during the chaos of the last week.
One exception has been Constellation Software. The company has, for much of its history, been incredibly stable, which is something investors desperately want right now.
The fact that it owns over 700 niche software businesses with solid customer bases across dozens of industries and countries also means it is highly diversified, minimizing the impact if one company (or even an entire sector) takes a hit.
Also, despite also underperforming this year, Kinaxis has rallied over the last week. This could be due to investors anticipating big demand for supply chain management software as some companies reshape things during a trade war.
This trend isn’t just because the Canadian market as a whole is weaker. Besides the fact that these companies are behind the rest of the TSX, the S&P/TSX Composite Index is down 8.98% so far this year — other U.S.-based indexes are down by more, save for the Dow Jones.
What’s going on: Shopify and Lightspeed are both tied to retail, which is one of the more exposed industries in a recession as people cut back on spending. That means existing clients are likewise going to be more budget-conscious — even if they don’t cut back on things they already pay for, it will at least be harder to sell them additional services. Even though Shopify has been making a push to bring more established retailers on board, new businesses are still the key to its growth, and these aren’t the kind of conditions where people are rushing to start new ventures.
Lightspeed, however, has some of its own stuff going on unrelated to broader market trends. Its stock tanked in February after it bailed on plans to sell the company and opted for a stock buy-back instead.
Over the last week, its stock performance has actually been slightly better than its fellow Canadian tech stocks.
OpenText, meanwhile, sells data management software. Like other B2B software companies, this is a hard time to upsell clients, but a recessionary environment also means some customers may pause or slow down their AI adoption, an area where OpenText has been jockeying for position. Roughly 60% of OpenText’s revenue also comes from the U.S., which could be jeopardized if trade relations deteriorate more or USD continues to drop.
What’s next: Like everything related to the U.S.’s trade war, this could all change quickly. All of the numbers are based on the market close yesterday, and as I write this, stocks across the board are rallying after Trump paused some tariffs. Right now, it does not seem like enough to close all of the gaps you see up above, and the fact that tariffs on China have been cranked up is still going to drag the tech industry.
There are also some unanswered questions about how exactly the pause impacts Canada, and the market might not like the answers.
The retaliatory tariffs are also being paused for 90 days, so, I dunno, maybe this all happens again in July?
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CONSUMER TECH
Tariffs take new tech off the shelf
Sales for everything from game consoles to computers have been paused as companies calculate a potential price hike.
The markets may be feeling more confident after U.S. president Donald Trump paused several tariffs, but a regular consumer gearing up for their tech purchase has reason to be less optimistic.
Tariffs on China have been dialed up further, which is likely not going to calm any of the companies that have held back or stopped selling products as they wait and see what the impact will be.
Nintendo was supposed to begin pre-orders for the Switch 2 today, but had to pause them in the U.S. and Canada to assess how tariffs could change the console’s already higher-than-expected pricetag.
Razer took down product pages for its gaming laptops, including the upcoming Blade 16.
Many hobbyist products, from Framework laptops to tiny Game Boys, have also been shelved because tariffs would mean .
Chipmaker Micron didn’t stop sales, but was reportedly planning a to-be-determined surcharge.
Why it’s happening: The solution is not as simple as jacking up the price of a product by the amount of costs tariffs could add. For one, that equation can be tricky, since consumer tech has so many different parts and materials from so many different places. But a simple one-for-one price increase may risk pricing a product out of the market. Some companies may decide to cut their margins to make sure people can actually afford to buy their stuff in the current economic landscape.
Shipping solution: Some companies are looking for literal ways around the tariffs by bringing products in from countries other than China, but for the last few weeks, the solution to mitigating the impact of tariffs was “ship as much stuff as we can as fast as possible.”
Apple reportedly sent five planes full of iPhones to the U.S. from India to beat the tariffs, and is considering shipping more devices through India.
Dell, Microsoft, and Lenovo also pressed their suppliers to get as many products onto U.S. soil as they could before tariffs kicked in.
Nintendo said it had already sent some completed Switch 2s to North America to get ahead of demand, but that now also means they have a bunch of consoles in storage that weren’t charged the new tariffs.
But: Aside from a few minor tweaks, it’s really unlikely that this is going to result in a complete supply chain restructuring. Those close to Trump have frequently used making an iPhone in the U.S. as an example, but doing that there — or in Canada, or any single country — is nearly impossible because of how complicated Apple has made its supply chain in order for its incredibly intricate phones and computers to be affordable to consumers. The same principle applies to most other pieces of consumer tech.
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