Hammond Power Solutions (TSX:HPS.A) shares fell C$8.99 to close at C$257.04 on the Toronto Stock Exchange on Thursday, October 15, the third losing session in a row for the transformer maker.

The company issued no news on Thursday. The drop came as a global selloff in AI-linked hardware stocks weighed on Canadian names tied to the data-centre and electrical infrastructure build-out, even as the broader market rallied.

What happened

The stock opened at C$265.16, which was also its high for the day, and fell as low as C$250.70 before closing at C$257.04. The previous close was C$266.03.

Thursday's drop capped a sharp three-day reversal. Hammond closed at C$308.11 on Friday, October 9, after a C$20.97 jump that day. It then fell C$24.54 on Tuesday, C$17.54 on Wednesday and C$8.99 on Thursday, a combined loss of about C$51 a share, or roughly a sixth of its value.

Trading was steady, with nearly 79,000 shares changing hands, in line with the two previous sessions. At Thursday's close, the company was valued at roughly C$3.1 billion on the market.

There was no Hammond announcement on Thursday. Its most recent release, on October 1, announced the appointment of Gervais Jacques to its board.

Why the AI mood matters

Hammond makes dry-type and liquid-filled transformers, reactors and related power-quality products, and investors have increasingly treated it as a play on rising electricity demand, including from data centres.

That link worked against it this week. Worries about a memory-chip glut sparked a global selloff in semiconductor and AI hardware stocks. SK Hynix drove a rout in South Korea's Kospi index, while Seagate Technology and Western Digital extended their losses.

In Toronto, Celestica fell C$14.44 to C$446.70, and other names seen as AI infrastructure beneficiaries, including Bird Construction and 5N Plus, also slipped. The S&P/TSX Composite still rose 552.64 points to 36,137.10, helped by lower bond yields and a rally in gold.

The business behind the stock

The long-term growth plan remains ambitious. On September 22, Hammond said it had signed a long-term lease for a new plant in Fort Worth, Texas, to build large standard and custom transformers for U.S. customers. It expects to spend about C$50 million to equip the first phase, funded from cash and credit facilities, and says the plant should add about C$250 million of manufacturing capacity, with production starting in stages in the fourth quarter of 2027.

In June, Hammond closed its roughly C$365 million purchase of AEG Power Solutions, which makes uninterruptible power supplies, battery chargers and rectifier systems for critical infrastructure. That deal anchors a new Integrated Electrical Solutions unit.

The company also lifted its quarterly dividend to C$0.29 a share at the start of September.

After a big run, the stock had a lot of optimism built in. That can leave shares vulnerable when the market starts questioning the pace of AI-related spending.

What to watch next

The next test is third-quarter report, which will show whether order intake and backlog are holding up and how the AEG deal is being folded in.

Investors will also watch the global chip and AI trade. If worries about a hardware glut fade, names like Hammond could recover quickly. If the selloff deepens, high-flying electrical equipment stocks may stay under pressure. Either way, the stock has shown it can move tens of dollars in a few sessions.