There is a phenomenon that happens to our brains when we say a word too many times. This occurrence, called semantic satiation, turns the word alien and strips it of meaning. Lately, that word is “sovereign.” Spend any time listening to Canadian political and business leaders talk about artificial intelligence and cloud computing, and you’ll hear “sovereign” so often that the word will be reduced to abstract sounds.
This was illustrated at the All In conference in Montreal at the end of September, a large AI event. There was nary a speech, panel or conversation that did not include the word. AI Minister Evan Solomon expounded on the need for Canada to build a sovereign digital economy that is “free from coercion” and that someone “can’t decide to turn off.” Doing so involves working with international partners including the United States, he said, the country that has most recently threatened Canada’s sovereignty.
Elsewhere at the event, the data centre executives who provide the infrastructure to run AI models and applications explained how their offerings could help bring about sovereignty more sovereign-ly than the competition. Bell Canada BCE-T touted its sovereign AI “fabric” (essentially a network of data centres), while rival Telus Corp. T-T said that its first sovereign AI “factory” (also a data centre) was now operating. Two Telus executives and Mr. Solomon even pushed a game-show-prop-sized button to “switch on” the data centre, appearing elated as, one assumes, the sovereignty began to flow.
The topic is hot because of the fraught relationship with the U.S. under President Donald Trump, and Canada’s reliance on American tech companies such as Microsoft Corp. MSFT-Q, Amazon.com Inc. AMZN-Q and Google GOOGL-Q for crucial digital services. Prime Minister Mark Carney has tasked the Major Projects Office with developing a sovereign cloud to give Canada “independent control over advanced computing power,” while the federal government is interested in procuring services from Canadian companies to build capacity.
Sovereignty is proving to be a malleable concept, however. In a way, sovereignty is in the eye of the company vying for a contract.
“Some people think of it like a light switch. Either you’re a sovereign cloud provider or you’re not,” said Heidi Tworek, a professor of history and public policy at the University of British Columbia. “But maybe it’s more of a dimmer.”
Very broadly, sovereignty means that Canada has control over the chips, data centres, models and data that comprise cloud computing and AI. Many factors are at play, such as the location of the data centres, the ownership of these facilities, the origins of the hardware inside of them, and where data is transferred and processed. There are a number of technical and operational measures companies can use to protect data in compliance with laws and regulations, which can potentially add some sovereignty points.
Dawn Farrell, head of the new federal Major Projects Office, which the Prime Minister has tasked with developing a sovereign cloud.AMBER BRACKEN/The Canadian Press
As Ottawa moves forward with its sovereign cloud, it will have to determine how realistic it is to hit all of those factors. “You could be fulfilling some of those, but not all of them,” Dr. Tworek said. “There may be some choices to be had.”
The focus on sovereignty is pushing companies from across the sector to consider how they can help Canada with those goals. “I actually took the liberty of looking up the word in the dictionary,” said Marc Mondesir, the managing director for Canada at Equinix Inc., a data centre company headquartered in California.
His framing positions Equinix to contribute to Canada’s sovereignty play in part because the company can, along with partners, configure its operations for customers to ensure data flows only within the country. “The moment it travels through a non-Canadian geography, then there’s risk,” Mr. Mondesir said.
The Equinix data centre in downtown Toronto, in November, 2024.Fred Lum/The Globe and Mail
That is particularly true of the U.S., where legislation such as the Cloud Act can compel American companies to comply with legal warrants for data that may be stored abroad. Earlier this year, a Microsoft executive was asked by a French senate committee whether he could guarantee under oath that data would never be transferred to the U.S. as part of a court order without the consent of French authorities. The executive could not guarantee that, he said, but he added this scenario had never occurred before.
Yet what has some people alarmed is that a lot of previously unthinkable events are unfolding under Mr. Trump, who uses economic leverage to achieve his goals and leans heavily on the judicial system. “We’re worried about Canadians being subject to a capricious and dangerous U.S. government,” said Brent Arnold, founder of Capstan Legal in Toronto, a law firm that focuses on cybersecurity and privacy. “What we care about is whether or not we have to hand over Canadians’ data.”
Even so, the U.S. tech giants are touting sovereign offerings. Google Canada has outlined how customers can set boundaries to ensure data stays in the country and how “sovereign encryption keys” given to customers can prevent unauthorized access, even by Google. It also offers an air-gapped cloud that, in effect, means Google does not have possession or control of the data, according to the company.
Mr. Arnold said these techniques could be promising but are untested. “We’ll know when the government tries to make a request or issue an order anyway, and then somebody hopefully fights it,” he said.
Companies do fight U.S. law enforcement demands. Microsoft said that all requests are subject to rigorous review to ensure they are legally valid. “Every year we reject a number of law enforcement requests and routinely challenge requests when they do not meet these requirements,” said Norman Barbosa, an associate general counsel with Microsoft. The company’s disclosures show that U.S. law enforcement requests for data housed in another country are rare. In the first half of last year, the company received 5,560 demands for consumer data from American law enforcement agencies; 52 warrants sought data stored abroad.
How the U.S. tech giants fit into Ottawa’s sovereign cloud project isn’t clear. The government has been consulting with industry, and in its request for information, it sets out a definition for a Canadian cloud provider. Importantly, that includes companies that are not subject to foreign laws that permit governments abroad to access data without Canada’s consent or request measures that could discontinue service. Another document notes that the government is trying to “better understand the impact of ownership, control and legal jurisdiction on the level of sovereignty that can realistically be achieved,” while noting that using infrastructure owned by hyperscalers “raises considerations on data sovereignty.”
A new Microsoft data centre campus, currently under construction in Mount Pleasant, Wis., in September. Canada relies on American tech companies such as Microsoft, Amazon and Google for crucial digital services.Audrey Richardson/Reuters
The irony is that even Canadian cloud companies may not be beyond the reach of U.S. courts if those companies have operations or employees down south, lawyers for Osler, Hoskin & Harcourt LLP wrote recently. Michael Fekete, a partner in the technology practice, pointed to a seminal case from the 1980s, in which the Bank of Nova Scotia fought a U.S. subpoena for records held in the Bahamas as part of a criminal investigation. Scotiabank said disclosure would violate Bahamian law, but U.S. courts rejected the argument.
Canadian telecommunications companies, meanwhile, are taking advantage of the demand for AI computing while positioning themselves as sovereign players. Telus chief innovation officer Hesham Fahmy said the company’s first AI data centre, which is in Quebec, is “fully sovereign.” He added that the company controls more of the elements around it, which is referred to as the tech stack. That includes purchasing and operating the computer chips directly, thereby cutting out an intermediary. “It sits here on Canadian soil, owned and run by Canadians, accessed by Canadians, on a network owned by Canadians,” Mr. Fahmy said.
Bell has partnered with another company called Buzz HPC to deliver and operate the chips in AI data centres. Buzz is a subsidiary of Hive Digital Technologies Ltd. HIVE-X, a cryptocurrency miner incorporated in Vancouver that last New Year’s Eve announced the “strategic relocation” of its headquarters to Texas partly because of the “pro-bitcoin stance” of the Trump administration. Its regulatory filings note that Hive is subject to the federal laws of Canada and the U.S.
“I admit it’s extremely confusing,” said Craig Tavares, president and chief operating officer of Buzz, who added the company is preparing to roll out educational material on the issue.
Still, the company’s structure will allow it to meet the government’s sovereignty objectives, he said, pointing out that it remains domiciled in Canada, data is encrypted and Buzz’s employees are located here. “Nobody in the Hive business has access to any kind of data or customer information in the Buzz business,” he said. The setup allows Buzz to provide infrastructure in Canada but also helps its parent company to better access international capital markets for funding. “If the definition of sovereign is zero connection to the U.S., you and I both know that’s highly, highly impractical,” Mr. Tavares said.
Ellen Murphy, a spokesperson for Bell, said that its data centre business is “fully aligned with Canada’s sovereign AI principles” and that Bell’s infrastructure and data are both “free from foreign government oversight.” She added that another one of its partners, American chip company Groq, has designed its hardware so that information is processed locally.
European companies don’t want to be left out, either. Estelle Azemard, vice-president of Canada and Latin America at French company OVHcloud, is eager to prove that it, too, can be part of Canada’s sovereignty goals. OVHcloud already has two data centres in Canada, including a production facility in Quebec where it assembles servers. “We are mastering an important part of the value chain, so we reduce our dependency on vendors,” she said. It’s also something competitors typically don’t bother with. This feature, along with other offerings, position OVHcloud to provide “the ultimate level of sovereignty,” she said.
Quebec company Hypertec Group Inc. also assembles and integrates servers into data centres. Moreover, it spun off a division called 5C Group to operate these facilities. “In terms of who’s the most sovereign,” said 5C chief executive officer Jonathan Ahdoot, “there’s no further you can go.” 5C already has four data centres in the U.S. His brother Simon, who is the CEO of Hypertec, argued the operational expertise of both companies is something that not even the telcos can compete with.
“We need somebody who’s been tussling with the international players,” he said.
In October, Hypertec teamed up with three other Canadian companies in the space to offer what it calls the country’s first “end-to-end sovereign AI-ready government cloud.” The partnership comprises physical data centres, hardware, software and cloud services, all Canadian owned and operated.
Even so, some experts are not convinced Canada has the financial means or willingness to fully untangle itself from the U.S. and achieve complete digital sovereignty. “We’re in this tug of war of trying to figure out how to navigate a system where we’re completely dependent on American security, but we want economic autonomy,” said Daniel Araya, a senior fellow with the Centre for International Governance Innovation.
Mr. Solomon, centre, joins Telus executives Hesham Fahmy, right, and Nazim Benhadid to 'switch on' Telus' first sovereign AI factory and data centre, on Sept. 24 in Montreal.Supplied
Rimouski, Que., is home to Telus' AI factory.Supplied
The government’s intent to build a sovereign cloud is worthy, he said, but there are big unknowns in terms of cost and whether the government can even pull it off. “The Canadian system is overly bureaucratized. It’s too sluggish for a technological disruption of this scale,” he said.
Taking the concept of sovereignty to its extreme would mean relying on Canadian companies that have no presence outside the country, and as a result, lack the expertise and funding necessary to compete globally. “That doesn’t bode well for having access to cutting-edge productivity-enhancing technologies,” said Mr. Fekete at Osler. Building custom solutions is incredibly challenging and costly, he said, while “the alternatives are commercially available tools and solutions that have large user bases and billions of dollars being invested, so you have more out-of-the-box functionality and less risk.”
The government will have to consider which forms of data, such as anything involving national security, are worth the expense of a sovereign cloud, he said. Applying the same standards to less sensitive operations might not make sense.
Indeed, sovereignty is not a selling point with everyone. Mr. Fahmy with Telus said companies in heavily regulated industries, such as finance and health care, are interested in sovereign AI services. Others simply need access to computer chips, which are in short supply.
Sometimes, a data centre is just a data centre.