Plus: did Sydney Sweeney boost AE or not? August 18, 2025 Sign Up | View online IN THIS ISSUE 8 min read 🚰 Damp data 👖 Denim drama 🤖 AI audit Gildan’s maverick CEO is embarking on a risky plan to take over a rival and expand its bland-underwear empire into America. | Sony Pictures Television THE WEEK IN MARKETS Feeling bullish about IPOs again Remember IPOs? The major markets hit more all-time highs last week, but the most telling sign of investor confidence right now is the apparent end of the IPO drought. Bullish, the Peter Thiel-backed cryptocurrency exchange, went public last week, and its stock price more than doubled out of the gate. Last month it was the collaborative-design company Figma, and in June it was Circle, the crypto-payments firm whose stock jumped nearly 350%. The dry spell began during the tech swoon of 2021, and investors wanted no part of risky new companies. The thaw means that exciting newish companies, like StubHub and Klarna, that have been flirting with IPOs might be motivated to take the plunge. THE CHART OF THE WEEK WHAT HAPPENED LAST WEEK IMPORTANT The markets are confident. Consumers are not. Are they both right? Business headlines lately seem like they’re describing two divergent economic realities. The stock market — essentially a prediction machine for how investors think businesses will perform in the future — is booming. But the latest survey of consumer sentiment — essentially a prediction machine for how normal Canadians think they’ll personally perform in the future — is gloomy, maybe because jobs are getting harder to find and living costs have skyrocketed. Turns out we do have one economy, but it’s shaped like a K. Save water by … deleting your emails? According to 404 Media, data centres in the UK are using so much water to cool their servers that officials are asking people to save water by trashing emails. Emails are just a drop in the bucket, though, compared to water being guzzled up by generative AI. New AI data centres tend to get built in flat, open places already facing water shortages, sparking fights over access between locals and tech companies. Just this month, an Alberta municipality declared an “agricultural disaster” over drought conditions at the same meeting where it blessed a $70-billion data-centre project. INTERESTING Canadian undies giant buys U.S. undies giant. Gildan Activewear, the Canadian bland-T-shirt purveyor, announced that it’s buying Hanesbrands for US$2.2 billion. It’s been quite a turnaround since last fall, when Gildan’s board kicked out — then swiftly reinstated — its co-founder and CEO of more than 40 years, Glenn Chamandy, amid a coup that cost the company US$77 million. Chamandy had built the company into an $8.25-billion juggernaut, but when sales slumped last year, he spooked some investors with a go-XL-or-go-home proposal to acquire Hanes. An activist investor led the fight to bring Chamandy back, and now his undie-empire plan is back in motion. Did Sydney Sweeney’s genes actually sell any American Eagle jeans? For a minute there, AE’s Sydney Sweeney sexy genes/jeans campaign and the exhausting week of online punditry it inspired seemed like a marketing coup: AE stock jumped 33%. But that hasn’t translated into actual sales. Foot traffic in stores last week was down nearly 9% year over year and down 4% the week before, when the campaign launched, halting a two-month streak of increases. Maybe shoppers prefer their discourse denim-free? —Sarah Rieger FROM OUR SPONSOR THE FOMO INDEX by Stacey Woods IMPORTANT ⌚️ New study finds smartwatches are useless for measuring stress. Do they have any idea how stressed out that makes us? Source ☕️ Starbucks Korea tells customers to stop bringing in their desktop computers and printers. And that Keurig machine is just insulting. Source 🤝 Hundreds of Canadians and Americans met for a cross-border handshake. Most of the Americans eventually did let go. Source 🍔 Newly opened Tesla Diner has already slashed its menu and hours. “Think you’ll be out by September?” asks Spirit Halloween. Source CRASH & BURN TO THE MOON ☠️ Man poisons himself by taking AI’s dietary advice. In AI’s defence, the directions to the hospital were flawless. Source 🧑‍⚖️ Daryl Hall’s lawsuit against John Oates ends in arbitration. The terms of the agreement are only for private eyes. Source ✌️ Alberta cannabis stores no longer require criminal-background checks for employees. Hear that, goody-goodies? You’re not the only ones who can sell drugs now. Source 📝 Poll: most Canadians favour a year of mandatory civil service for people under 30. People over 30 making a big to-do list. Source WHO CARES THE BIG IMPORTANT STORY DEPT. OF JUST ASKING QUESTIONS Is AI Mania Propping Up the Economy? Kind of, Maybe! Over the past few weeks, a chart from a Wall Street Journal column by Greg Ip — arguing that AI may pose risks to the economy — has circulated widely in financial corners of social media. The chart, which we reproduced below, shows the growing gap between what four tech giants — Alphabet, Amazon, Meta, and Microsoft — say they’re generating and the cash they’re actually pulling in. Why are those two numbers not basically the same? Because this year the tech firms are expected to spend US$364 billion on data centres, chips, and other AI-related stuff, in a bid to dominate the new technology. In the first half of 2025, AI spending was so strong that it (no kidding) “propped up the economy while consumer spending stagnated,” noted Ip, of the WSJ. Financial Twitter cared a great deal about the chart from Ip’s column because it raised some uncomfortable questions, such as: Is the AI race a giant Ponzi-adjacent scheme that is making everyone look super profitable when that might not in fact be the case? That’s a big question! We figured we’d dive in and explain. Here goes: First, let’s talk about the chart: The tricky thing about AI spending is that, thanks to accounting rules, tech companies are able to mask the tremendous expense in their financials. How it works is that capital expenditures on infrastructure, like AI data centres, are not booked as immediate expenses on the tech companies’ income statements; instead, companies can stretch their AI spending over decades in some cases, making them look far more profitable now than they may turn out to be. What the chart reveals is that when you look at the tech companies’ net income (aka all the money they bring in from their myriad services) in relation to their free cash flow (aka the money they have left after covering their expenditures — money that can be used for things like dividends), it becomes clear how much cash is going out the door. It’s also clear that AI isn’t bringing in mountains of cash yet; otherwise, free cash flow would be trending upward. Here are three broad responses to this chart: The bear case: Investors have priced huge, AI-fuelled profits into the high valuations of tech stocks. The concern is that AI hasn’t made workers terribly more productive, while a handful of the biggest tech firms are spending outrageous sums on unprofitable AI infrastructure that may quickly become obsolete. If profits don’t materialize soon, investors will likely dump their shares and the stock market will feel serious pain, since the seven biggest U.S. tech companies currently represent a staggering 34% of the S&P 500. The bull case: Businesses are expected to spend an enormous amount of money on AI in the years to come, and they surely will as AI boosts worker productivity. PCs weren’t terribly helpful, or super profitable, until the internet came along and then, boom!, they became indispensable. Same deal with AI. Just be patient. The moderate case: Yes, the AI buildout is expensive, but if the tech behemoths sit on the sidelines to see if AI will be truly revolutionary, they risk losing the race to AI dominance. Any new technology is speculative, but the tech giants are very profitable, and AI is a worthy, potentially lucrative gamble. THE UPSHOT There have been whispers that AI could foment a dot-com-era-style bubble that’s bound to pop — though Ip, of the WSJ, argued that it seems far-fetched at the moment, mostly because the tech behemoths are still highly profitable from their core businesses, like ad sales. Still, the AI-spending debate underscores why investing in tech carries such high risk and such high potential reward. It’s impossible to know which nascent technology will change the world until it happens. All investors can do is guess how the future might unfold and adapt their views as new data becomes available. —Brennan Doherty OTHER VERY GOOD READS 🪱 Ontario’s Worm Hunters Nearly all bait worms are hand-plucked here. But the business is changing. | The Local 🍟 The Great French Fry Mystery An international scam that started with an A&W bag on a porch. | Toronto Life 🎙️ Kyla Scanlon on How Money and Markets Work Our former TLDR podcast co-host joined Jon Stewart for some econ talk. | The Daily Show THE WISDOM OF SOCIAL Another wild underwear-ownership fact: Fruit of the Loom is a subsidiary of Berkshire Hathaway. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Abigail Covington (writer), Brennan Doherty (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), (Ambrose Martos (fact checker), Ciara Rickard (copy editor), Maude Campbell (copy editor), Sara Black McCulloch (fact checker), Mohini Tailor (lifecycle marketing manager), Eva Grace Clement Cruz (editorial producer), Matthew Karasz (markets editor) Jared Sullivan (senior editor), Peter Martin (senior editor), and Devin Friedman (editor-in-chief). Disclosures: Contributors to this newsletter own shares in Amazon, Google, and Microsoft. Clarification: Last week, in our Big Important Story, we included the wrong link to an article about how much tariffs are costing automakers to ship parts over the border. You can read the correct story here. Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE Self-directed investing is offered by Wealthsimple Investments Inc. (WSII). WSII is a member of the Canadian Investment Regulatory Organization (CIRO). Customer accounts held at WSII are protected by Canadian Investor Protection Fund (CIPF) within specified limits in the event WSII becomes insolvent. A brochure describing the nature and limits of coverage is available upon request or at CIPF. TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. 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