The AI economy is booming in the United States, but Canada seems to be lagging behind. This raises some intriguing questions about the future of technology and its impact on our economies.
The AI Boom and its Implications
The U.S. is experiencing a rapid transformation, with data centers taking precedence over traditional office buildings. This shift is fueled by massive investments from tech giants, who are committing billions to AI-related infrastructure. The result? A significant boost to economic growth.
However, Canada's story is quite different. Despite numerous data center project announcements, very few have actually commenced construction. This delay can be attributed to various factors, including Canada's smaller size, challenges in securing semiconductors, and a heavily regulated electricity market.
Canada's Slow Adoption
Canada's sluggish adoption of AI extends beyond data centers. Workers and businesses have been slower to embrace computing technology, continuing a trend of underinvestment that has plagued the country's productivity. This is evident in the trade data, where Canada lags behind the U.S. in securing AI-related equipment.
According to a report by Desjardins, approximately 30% of U.S. real GDP growth last year stemmed from private investment in IT equipment and software. In contrast, Canada's AI-related capital spending contributed little more than 5% to economic growth in 2025.
Data Center Construction and its Impact
The construction of data centers is a key indicator of a country's AI ambitions. In the U.S., companies spent over $50 billion on an annualized basis on data center construction in April, a staggering 180% increase in just three years.
In Canada, however, the picture is less clear. Statistics Canada lacks detailed measures for data center construction, mixing it with investments in transportation and utilities. The available data suggests a significant decline in permits issued for communication buildings, which include data centers.
The Role of Electricity and Regulation
One of the key bottlenecks for AI in Canada is access to power. Alberta, with its fully deregulated power market, has an advantage in attracting data centers. The province's ambitious goal of $100 billion in data center investment by 2030 highlights this.
However, even in Alberta, developers face opposition, and the recent rejection of two planned projects in Manitoba and Ontario demonstrates the challenges.
Canada's Realistic Goals
Viet Vu, manager of economic research at The Dais, suggests that Canada needs to be realistic about its data center goals. He cautions against using the U.S. as a benchmark, as the rollout south of the border is based on optimistic future gains from AI, which may not materialize.
A bigger concern, according to Vu, is the growing antipathy toward AI in Canada. Global surveys reveal that Canadians' trust in the technology is significantly lower than the global average.
The Investment Gap
Sal Guatieri, a senior economist at Bank of Montreal, highlights the concerning gap between Canada and the U.S. in business investment in innovative technologies. Canada's underinvestment in information technologies is not a new phenomenon, dating back to the tech boom of the late 1990s.
The investment gap has widened since 2023, with the U.S. experiencing a surge in spending on computer equipment as a share of GDP, while Canada's increase has been modest.
The Impact on Productivity
It's unclear whether the higher U.S. investment levels related to AI are directly responsible for the country's productivity boom. While U.S. productivity growth has been rising at its fastest pace in two decades, this trend began well before the AI hysteria.
Nevertheless, the widening gulf in business investment between the two countries is a cause for concern, especially given Canada's poor track record.
A Milder Tailwind for Canada
The first quarter of the year showed some improvement for Canada, with business spending on computers and software climbing by nearly 8% from the previous year. However, the trade war and tariff uncertainty have kept chief financial officers cautious about spending.
According to Guatieri, the AI boom is adding some resilience to the U.S. expansion but providing only a mild tailwind for Canada.
The U.S. Dependency on Imports
The U.S. heavily relies on imports for computer processors and servers, which has created trade distortions. However, the true scale of the computer equipment and other products required for the AI rollout is even more significant.
A study by Michael Waugh, an economist at the Federal Reserve Bank of Minneapolis, found that these products amounted to 23% of all U.S. imports last year. Without the AI boom, the U.S. goods trade deficit would have been roughly $200 billion smaller, or 16% lower.
When applied to Canadian imports, the results were dramatically different, with Canada's import growth staying relatively stable compared to the U.S.'s explosive increase.
Conclusion
The AI economy is transforming the U.S. at a frantic pace, while Canada is experiencing a blip. This disparity highlights the importance of embracing innovative technologies and addressing the underlying challenges, such as access to power and public trust. As the world moves towards an AI-driven future, Canada must navigate these complexities to stay competitive.
