Over the past year, the Federal Government significantly invested in artificial intelligence (AI). These investments focused on two critical areas: building sovereign compute capacity and accelerating responsible AI adoption in the public sector and key industries. In this end-of-year roundup, we take a closer look at some key initiatives across the country.
Data Centres Take Centre Stage
Compute capacity refers to the resources needed to power AI systems. AI tools rely on large data centres to provide the compute capacity necessary to process an ever growing set of user demands. The explosive demand for AI products has driven equally explosive capital expenditure to construct these data centres.
To secure access to AI compute for Canadian companies and researchers, in mid-2024 the Federal Government launched their Sovereign AI Compute Strategy. Canada is funding C$2 billion in AI investments over five years, with 2025 being the first full year of implementation. The strategy has three main prongs:
Private Sector Investment
The first prong of Canada's sovereign AI compute initiative is mobilizing private sector investment. To that end, the Federal Government is investing C$700 million in the AI Compute Challenge. The challenge invites proposals to strengthen Canada's AI infrastructure by:
- expanding domestic AI compute capacity by constructing new data centres; and
- allocating compute capacity from existing data centres to Canadian firms at competitive rates.
The AI Compute Challenge targets experienced industry players. The primary focus of the challenge is to facilitate ambitious projects, such as state-of-the-art data centres, that may be difficult to fund using private investment alone. By allocating compute capacity, the Federal Government is creating stable use agreements to reduce the risk of investments. A secondary goal is to support domestic development of auxiliary technologies such as AI chips and servers.
Building Public AI Infrastructure
The second prong of the Canada's compute strategy is building public compute infrastructure, with C$1 billion in funding allocated. This funding includes up to C$705 million invested in the AI Sovereign Compute Infrastructure Program.
The program envisions a system of Canadian-owned compute infrastructure, ensuring access for Canadian researchers and private R&D. As an initial step, in early 2025, the Federal Government invited Statements of Interest from organizations with the capacity to develop the compute resources.
The Federal Government has also allocated funds to construct a secure compute facility to support the National Research Council of Canada. This facility will be used to provide capacity for government and industry research and to support AI development for national security.
While these public initiatives will help secure Canada's sovereign compute capacity over the long term, much of the necessary infrastructure will take years to develop. To supplement the capacity available in the short term, the Federal Government has allocated a further C$200 million to augment existing data centres.
Facilitating Access to Compute
Lastly, Canada has financed the AI Compute Access Fund to support domestic AI companies. Through this program, the Federal Government has contributed C$300 million to subsidize access to compute resources for domestic firms. The initial call for proposals closed on July 31, 2025, but the program contemplates future invitations for proposals. To be eligible for funding, applicants must be for-profit companies registered in Canada with domestic R&D teams working on AI products and services. If selected, applicants can receive between C$100,000 and C$5 million over up to three years to fund compute costs.
Propelling AI Adoption Across the Country
Across Canada, regional development agencies support small and medium-sized businesses and foster innovation. In Budget 2024, the Federal Government allocated C$200 million in funding for development agencies to support AI adoption in Canada's major industries. The program has two streams:
- the first stream helps AI companies bring their products to market; and
- the second stream encourages legacy industries to adopt AI tools to improve productivity and drive growth.
Beyond regional support, the Federal Government is also pushing AI adoption through the National Research Council's Industrial Research Assistance Program (IRAP). Through IRAP's AI Assist program, small and medium-sized businesses can confer with an Industrial Technology Advisor who can help them adopt and apply AI technologies. The AI Assist program is available to companies who develop AI products as well as companies attempting to adopt or integrate AI technologies into their services.
Driving Domestic R&D with Canada's AI Institutes
In 2021, the Federal Government announced the Pan-Canadian Artificial Intelligence Strategy to attract talent and support R&D. The strategy provides C$20 million in funding to Canada's three AI Institutes:
- Amii, located in Edmonton, Alberta.
- Mila, located in Montreal, Quebec.
- The Vector Institute, located in Toronto, Ontario.
Throughout 2025, the AI institutes continued receiving funding through the strategy. This funding is set to be fully dispersed in 2026.
Budget 2025 Signals More Investment to Come
This November, the Federal Government's Budget 2025 passed through the House of Commons. Building on the government's earlier initiatives, Budget 2025 proposes large-scale investment in AI technology.
Beginning in 2025-2026, the Federal Government will make an additional C$925.6 million investment over the next five years available to support sovereign AI infrastructure. Like the Sovereign Compute Infrastructure Program, the goal of this funding is to expand the amount of AI compute available to Canadian companies and research organizations.
The Budget also contemplates further public private cooperation. The Minister of Artificial Intelligence and Digital Innovation plans to engage with industry and enter into Memoranda of Understanding to facilitate the development of AI infrastructure projects.
Furthermore, the Memorandum of Understanding between Alberta and the Federal Government, dated November 27, 2025, put forward various measures directed towards the energy industry, noting that "Canada will be able to … develop new technologies including AI." Further, British Columbia's Bill 31 – 2025, the Energy Statutes Amendment Act, 2025, appears to seek to restrict power for AI and data centres, as such facilities will now be required to bid for power.
Looking Forward
We expect that 2026 will continue the same trajectory with respect to AI investment in Canada: more funding, more announcements and more initiatives. We also expect to see developments in AI regulation, particularly surrounding data privacy, algorithmic transparency and intellectual property ownership, while further investments in AI research and development to occur in tandem with government and post-secondary institutions.
As the AI industry continues to evolve at a rapid pace, Bennett Jones's AI team helps our clients navigate the ever-changing landscape of AI adoption and development across Canada. To discuss the developments and opportunities shaping the AI industry, please contact the authors.
Please note that this publication presents an overview of notable legal trends and related updates. It is intended for informational purposes and not as a replacement for detailed legal advice. If you need guidance tailored to your specific circumstances, please contact one of the authors to explore how we can help you navigate your legal needs.
