Good morning. Canada once sat at the frontier of artificial intelligence, but the economic gains went elsewhere. Now, industry leaders are looking to Ottawa’s fall budget as the test of whether Canada can hold its ground in the next tech race. That’s in focus today, followed by a stark snapshot of Toronto’s housing strain.
Up first
In the news
Labour: A steep new U.S. visa fee could help Canadian businesses recruit foreign talent, but experts say immigration reform is needed.
Trade: Canada can find new buyers for $12-billion in food exports shipped to U.S., a Crown corporation report says.
Sports: Rogers needs a private equity partner for sports, not an IPO spinout, Andrew Willis writes.
On our radar
- Bank of Canada Governor Tiff Macklem delivers his economic outlook in a speech in Saskatoon.
- U.S. Federal Reserve Chair Jerome Powell does the same in Rhode Island.
- Canada’s new housing price index for August is expected to show a decline of 0.1 per cent from July and a drop of 1.4 per cent year-over-year.
- Micron Technology will look to ride investors’ renewed enthusiasm for AI with earnings after the bell.
Nord Quantique CEO Julien Camirand-Lemyre at the company's lab in Sherbrooke, Que.Evan Buhler/The Globe and Mail
In focus
The amazing quantum race
Canadian universities were once leaders in artificial intelligence. Toronto, Montreal and Edmonton had some of the world’s top programs in machine learning and neural networks. Their researchers shaped breakthroughs that made AI practical, and Canada was widely seen as a hotbed of innovation.
But while the country invested meaningfully, others invested more – in research, in commercialization, in hiring Canadian talent and in building the companies that captured the returns.
Looking back, it’s easy to cast that period as one of abject failure. The exodus of talent and capital was real, but what followed was more complicated. The country still boasts world-class institutes. Shopify remains a global platform headquartered in Canada. Innovative startups such as Cohere and Waabi have raised significant capital. And pension funds have begun backing homegrown ventures. The problem was less invention than scale.
- Constellation Software holds rare call to address investor concerns about AI
- Canada had – and lost – its lead in AI. Can it avoid making the same mistake in the next emerging global technology race?
The new digital battleground
That history now hangs over the next great technology race – and over Ottawa, which is expected to set out its approach to emerging research and commercialization in the fall budget. The federal government has already funded more than $1-billion in quantum research since 2012 and pledged $360-million in a national strategy launched in 2023, but industry leaders say those commitments are already falling behind. The U.S. and China have committed billions, and even individual states such as Illinois and Maryland are outspending Canada.
An artist's concept of manned and unmanned combat aerial vehicles operating together using technology from DARPA’s Artificial Intelligence Reinforcements program. In April, DARPA announced that three Canadian companies qualified for the Quantum Benchmarking Initiative.Colie Wertz/DARPA
The U.S. military has also mounted a US$300-million competition to bring quantum computers to scale by 2033. Canada’s best hopes – Xanadu, Photonic and Nord Quantique – are competing on Washington’s terms. “We’re past the tipping point on whether countries need to bet big on quantum,” said Evan Solomon, Canada’s first Minister of AI and Digital Innovation. “For security, sovereignty and commercial reasons, you have to.”
In quantum computing, industry leaders see a chance for Canada to learn from its AI missteps – an opportunity to anchor a technology that could prove even more disruptive. If artificial intelligence reshaped how information is processed, quantum computing promises to solve problems that even today’s most powerful AI-powered machines cannot hope to touch.
- Radars, cybersecurity and communications: Why quantum technology matters for defence
- Opinion: The future is quantum. Canada must seize and industrialize it
Skills to pay the bills
“What we can imagine today for quantum is not the limit,” Rafal Janik, the chief operating officer of Xanadu Quantum Technologies, told The Globe. For Canada, recognition is one thing, but awards won’t help mitigate trade wars. “Canada doesn’t need more Nobel prizes,” Photonic founder Stephanie Simmons told The Globe. “Prizes won’t move the needle for us as a country. Let’s make markets, let’s grow the income tax base.”
That’s a challenge when the U.S. is also luring talent by offering a lower-tax environment. A study by Toronto venture firm Leaders Fund found that only 32 per cent of Canadian-led “high-potential” startups launched in 2024 were headquartered in Canada, down from more than two-thirds before the pandemic; nearly half the latest cohort are now based in the United States. The same study found the U.S. produced 45 times as many such startups.
“If too many of our best and brightest move to the U.S. early on, it will be harder to bring them back and you’ll have a lost generation,” said Chad Bayne, co-chair of law firm Osler, Hoskin and Harcourt’s technology practice.
{How quantum computing works: On, off and both: Regular computers process information in bits – on or off. Quantum machines use “qubits,” which can be on, off or both at once, a property called superposition that lets them test many possibilities simultaneously. A qubit can take the form of a superconducting circuit cooled near absolute zero or even a single atom trapped by lasers, housed inside large, complex machines. When qubits are entangled, they work together in ways that could eventually transform fields from medicine to cybersecurity – though those potential breakthroughs are years away.}
Charted
From boom to strain
Toronto’s housing market is facing a wave of financial strain not seen in decades, with distressed sales and non-performing mortgages climbing at an alarming pace.
Between the first quarter of 2017 and the second quarter of 2023, the average share of non-performing mortgages in the GTA was just 0.06 per cent. Today, that figure is approaching 0.42 per cent – a sevenfold surge in only a few years.
Bookmarked
On our reading list
In class: The University of Waterloo’s dean of engineering says higher education needs to be a clearer path for young men.
On our plates: Easy ways to use corn and tomatoes, both at their very best in September.
Getting care: When this hospital couldn’t staff its ER, doctors were asked to name their price.
Morning update
Global markets climbed, fuelled by AI optimism luring money into technology stocks and bets on U.S. interest rate cuts.
Wall Street futures were mixed after U.S. markets were buoyed yesterday by Nvidia’s announcement it will invest up to US$100-billion in OpenAI,
TSX futures pointed higher with Canada’s main stock market on the verge of hitting 30,000 for the first time.
Overseas, the pan-European STOXX 600 was up 0.47 per cent in morning trading. Britain’s FTSE 100 rose 0.18 per cent, Germany’s DAX gained 0.55 per cent and France’s CAC 40 advanced 0.9 per cent.
In Asia, Japan’s Nikkei was closed for a holiday, while Hong Kong’s Hang Seng slid 0.7 per cent.
The Canadian dollar traded at 72.33 U.S. cents.