Defining Sovereign Cloud
Ottawa is moving fast on sovereign AI infrastructure, but it’s worth pausing to ask if they have a clear idea of what they’re actually trying to accomplish.
The federal government opened a one-month intake window for proposals to build “sovereign, large-scale AI data centres with a total capacity of about 100 megawatts.” The 2025 budget set aside $925.6 million over five years for new sovereign AI compute infrastructure.
While 100 megawatts might sound like a lot, it’s worth putting the scale in perspective: Meta is currently building a single AI data centre in Texas with a planned capacity of one gigawatt — ten times larger than the projects that Canada is contemplating. OpenAI is issuing press releases about “Project Stargate” which is touted to be in the range of US$500 billion, 10-gigawatt AI compute infrastructure.
So this is a very high-stakes poker game we’re getting into. The 100MW threshold matters because it’s a common threshold for “hyperscale” facilities. These require a huge, continuous electricity demand. One of the pointed questions that the government asks on their intake form is: “Do you have electricity supply agreements either in place or being negotiated?”
But what caught our eye in the government’s intake form was the “sovereign” language.
They ask if the proposed data centre will be built on Canadian soil. They want to hear about Indigenous participation, and they want to know if the projects have Canadian suppliers feeding into their technology stack.
These are all valid categories, but they are incomplete.
We encountered the same toward the end of 2025 when taking a close look at the government’s “Buy Canadian” policy — which rests on a definition that allows companies to qualify as “Canadian” even if they’re not headquartered in Canada and they’re not majority owned by Canadians.
The optimistic take here is that Ottawa is trying to course correct with the sovereign AI data centres: The intake form explicitly asks if the proponent is majority owned by Canadians. But if Canada still doesn’t have a clean, operational definition of “sovereign AI” then that ambiguity risks turning “sovereignty” into a vibes-based label that’s easy to market and hard to enforce.
One concern we’ve got as the government presses onward with the infrastructure buildout is that Canada may be at risk of focusing too much at the low-value end of the stack. Data centres can generate economic activity through short-term construction, but the harder question is value capture: Where do profits, IP, data and control accrue? Politicians tend to care about jobs, but these data centres don’t employ many people for ongoing maintenance and operations.
If we’re serious about sovereign compute, we need sovereign rules: a real definition of a “Canadian company” that goes beyond incorporation optics. It needs to be a definition that considers ownership and control.
At the Canadian Shield Institute, we’re working on these questions right now, and for for the next few months we’re going to be heavily focused on the definition of a Canadian company, and what a real, meaningful sovereign cloud strategy looks like.
More to say on this soon.
Shield In the News
Canadian Shield Institute board member Jim Balsillie was in the Globe and Mail this week, talking about data privacy as a cost-of-living issue.
Jim’s full op-ed is worth a read, but his key point is that when multinational giants have vast quantities of data and the power to dynamically set prices, you’re not shopping in a free market anymore:
“You are increasingly a market of one, and the seller’s information asymmetry – from tracking and profiling you – allows for exploitative pricing, which creates higher consumer costs.”
And in Episode 2 of Cancon, host Jordan Heath-Rawlings is joined by Emily Osborne, a policy research associate at SHIELD, for a deep dive into exactly who makes what in Canada when it comes to the booze the rest of the world sees as “Canadian”. The episode was inspired by our newsletter, Sovereignty on the Rocks.
Song of the Week
“All I know” by William Prince.
Canada and the EU Can Be Friends With Benefits
Ever since Prime Minister Mark Carney visited the European Parliament in September, we’ve been thinking about what a deeper alliance across the Atlantic Ocean could mean. As we hit send on this email, Carney is meeting with António Costa, President of the European Council, and Ursula von der Leyen, President of the European Commission, in Montreal. At the end of it all, we’re expecting an announcement of … something. There have been a lot of anonymous tips in news reporting, but at the Canadian Shield Institute, we prefer to read the formal communiqué rather than trying to interpret whispers. In the run-up to the summit, we’ve been doing a bit of research, and we published a few articles to set the stage.
EU Media Marketplace
The Europeans are trying to break the AdTech duopoly. Canadian companies have tried to work together to create an alternative to Google and Meta’s dominance. So far, Canada’s efforts have fallen flat. Will this new EU enterprise fare any better? Read our analysis here.
We find this whole situation very interesting for two reasons: First, Canada and Europe have a lot of the same problems right now. We’re all trying to figure out how to reduce vulnerability from the United States, and that vulnerability extends to digital reliance on private-sector technology platforms. It seems like we could benefit by joining forces, but it’s going to take some work figuring out exactly what that looks like in practice. Second, AdTech is just really interesting! Programmatic targeted advertising is the economic engine of the internet, and in turn this kind of advertising is hugely influential on culture and society. AdTech dictates what kinds of businesses thrive and what kinds of content gets posted online. Once you start researching it, AdTech quickly starts to look like one of the most important dimensions of digital sovereignty. If the online economy is entirely dominated by systems controlled by a handful of big American technology companies, realistically both Canada and the EU will always be on the back foot on digital governance.
Digital Services Trade
Speaking of being on the back foot, did you know that U.S. digital services exports to Canada are worth more than all the autos, steel, aluminum, lumber, potash and electricity put together? Why aren’t we talking about digital trade policy more in the negotiations with the United States? Read our analysis here.
And the European Union is in a similar position. The EU has done a lot more to assert digital governance, but their trade deficit on digital services just keeps going up. This is a kind of reliance that creates a meaningful vulnerability if the United States keeps playing hardball. Read our analysis about EU digital trade here.
Digital services might be a promising area for Canada and the European Union to work together. When the final communiqué is delivered from the Canada-EU summit, we will be combing through it for specific mentions of digital trade collaboration.
Digital Sovereignty Policy
Despite the EU’s digital dependence, we see a lot to admire in how the Europeans have been trying to assert their digital sovereignty. To be blunt: They’re trying things! Canada has often been slow to pass meaningful digital regulation, and quick to walk back policies that offend the Americans. The EU has enacted some really interesting regulations. Could Canada use “digital trade alignment” as cover to follow the EU’s lead? Read our analysis here.
The Bottom Line
Overall, when it comes to digital governance, we have a lot of hard work ahead of us. Digital policy is complicated and opaque, and it’s not enough to just pass a good law. Ongoing enforcement is a real challenge too. But this is one of the most pressing policy issues of our time, and with the accelerating deployment of AI systems, this issue is only going to become more urgent. It’s not as easy as striking a deal to sell soybeans, but digital governance is an area where Canada and the EU are natural partners, and it’s something we should be working on.
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