The Decibel - AI and digital sovereignty in the ‘elbows up’ era

Episode Date: October 20, 2025

There has been a lot of talk about Canadian sovereignty ever since the election of Donald Trump. And that sovereignty talk extends to the digital realm too. Last month, nearly 70 public figures and experts sent a letter to Prime Minister Mark Carney demanding he take sovereignty in the digital space more seriously. The government is currently working on that, with plans to build a sovereign cloud and AI infrastructure. These projects would have major implications for Canada’s data security and economy.Globe business reporter Joe Castaldo and innovation reporter Pippa Norman explain why building sovereign digital companies is not as straightforward as it might seem.Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Canadian sovereignty. It's something we've been hearing a lot about ever since U.S. President Donald Trump took office. It's about protecting our natural resources and manufacturing sectors, but it extends to all parts of our economy. In early September, 70 public figures, including Margaret Atwood and Adrian Clarkson, wrote to the Prime Minister, urging him to defend Canada's digital sovereignty. To that end, Prime Minister Mark Carney has asked the major projects office to build a, quote, sovereign cloud. And the government is currently asking for public input on the project.

But what does digital sovereignty mean exactly? Today, Globe Business Reporter Joe Castaldo and innovation reporter Pippa Norman are on the show. They'll tell us why digital sovereignty is such a hot issue, what progress Canada has made in building it out, and if it's even possible to have sovereignty over the digital. space in a globally connected world. I'm Cheryl Sutherland, and this is the decibel from the Globe and Mail. Joe, Pippa, thanks so much for being on the show. Thanks.

Thanks so much. So, Joe, we've been hearing a lot about Canadian sovereignty ever since Donald Trump took office, but we've been focusing mainly on physical products and infrastructure projects, not so much tech. So can you tell me about what we mean when we say digital sovereignty? Like, what are we talking about? Well, we're talking about physical infrastructure too in one way. So the infrastructure behind artificial intelligence and cloud computing.

So basically data centers and the stuff inside data centers. So having that Canadian owned and Canadian operated is one aspect of it. And then this gets more nebulous, but like the data itself and ensuring that sensitive data is subject only to the laws of Canada as opposed to another country. That's it in a nutshell. It gets more complicated from there because you have foreign companies that operate in this space saying that they too can offer Canada sovereign solutions to help hit these goals. And there's also the reality that Canada can't do all of this.

on its own. There has to be likely, in a lot of cases, some foreign company involvement, right? Canada can't wall itself off from the rest of the world entirely. So it's a bit of a tricky balance. Pippa, what kind of information are we referring to? Like, is it my personal information or more sensitive information that maybe governments or say hospitals have? It could easily be either or both in terms of what the government of Canada is considering building when it talks about this sovereign cloud, it could encompass basically anything held by a government institution. So whether that's your own personal data or like internal government data, we don't really know yet how far reaching the government will end up making this or want it to

be. But some government departments that have come up in my discussions with experts about the topic that this might make sense to apply to would be things like healthcare or the military, for example. Okay. Pippa, let's talk about what full sovereignty would look like for one of these companies. How many pieces are involved? Yeah. So there's a few layers that I feel like a company would need to think about when they think about how sovereign they are. So, you know, for example, there's like the physical location of a company's data center, for example, like where is that center located? Then there's the company's ownership and employees. Where are they located? And then the same question applies to a

companies' customers or like the data center's users, where are they located? Are they in the same country or the same region as the data center or are they kind of also located elsewhere? And then there's the actual hardware, like the chips that we've mentioned, where are those made? Who are they made by? Are they made in the same country or are they being brought in from elsewhere? And then are all of these things something that matter at the end of the day when it comes to sovereignty? So there's a bunch of different layers for a company and also the government to consider when it kind of is shaping its definition of a sovereign company. So for a company to be sovereign, they'd have to hit all of these things? I mean, I think that's kind of what the government is still trying to figure

out. Okay, Joe, why is sovereignty important? Well, okay, so this sovereignty discussion, you know, it's kind of evident flowed. It picked up last year. in terms of AI, because to build an AI model, to use AI applications, you need a lot of this physical infrastructure, right? You need the data centers and the chips. And there wasn't enough of this infrastructure. The demand to use it was incredibly high. The supply was not there. And countries began thinking, well, like, we need this stuff in our own countries so that we can provide these services to companies here so that, you know, they can capitalize on AI. So in the AI context, you know, sovereignty really emerged there, like talking about

building sovereign infrastructure in Canada for AI. And the government announced a program on this last year. So that was about just like having the physical data centers in your country. What's happened this year is the conversation has really evolved because of Donald Trump. And that trade war, of course. Yeah, and also some of the legislation in the U.S. that basically would compel or can compel a U.S. companies such as Microsoft or Google or Amazon to comply with a law enforcement request for data held by their facilities, even if that data is in a data center in Canada. And the customer, you know, the owner of that data might not even be notified that this process is going on. So people, now are arguing, well, that's a risk. If you're talking about sensitive data, like, is it really secure to have it in a data center operated by an American company? And that argument might have some merit. Some people argue it's kind of overblown and a bit delving into fearmongery.

But, you know, lots of weird things are happening under Trump. Like, we're seeing how he can bend institutions and companies to his will. So just so I'm clear, then, it's like the issue here is that the U.S. law would supersede Canadian law here? That's the concern, yes. And this came up in Europe recently, actually, in France. There was a Senate committee there that was really grilling this Microsoft executive on this issue. And, you know, they're asking him, like, can you guarantee under oath that, you know, our data would never be transferred to the U.S. by a court order without the consent of French authorities and the Microsoft executive.

have said, well, no, I can't guarantee that. And so a lot of people have taken that to mean that, like, this is an acknowledgement that for Microsoft, U.S. law, you know, does supersede, you know, in other countries' law. That's the concern. Also, if you look at what the government is saying in terms of its sovereign cloud proposal, they want to hear from companies that, A, are not subject to foreign laws over data, but B, not subject to foreign laws where a government could lean on them to discontinue or interrupt services. Okay.

So, you know, to take an extreme example, like telling Microsoft, hey, cut off cloud services to Canada, right? That is also a risk that is on people's minds. I'm not sure how realistic that is, but, you know, these are the kinds of things that are under discussion. Okay. Interesting. Pippa, what is the government doing to get? get us to this digital sovereignty? They've just concluded a period of information gathering.

So they put out what's called a request for information or an RFI. It's kind of what comes before, like a request for proposals, which is when you actually ask for companies to kind of bid on something. But this is basically just a period during which stakeholders, mostly companies, have a chance to give the government feedback on basically like what they should go shopping for when they're ready to buy. So in their initial request for information, they described looking for a, quote, fully sovereign public cloud solution and establishing a

Canadian sovereign procurement stream for digital services. So those were kind of some of the terms that they put out there. Whether or not that includes American or multinational companies is still kind of yet to be determined, it seems. They took the liberty of defining Canadian-owned and controlled vendors in their RFI. Like they kind of put out a definition of what that was and what they were looking for. But they still invited non-Canadian companies to provide feedback and take part in the information gathering process. To be precise, it said that it was, quote, open to understanding how vendors manage foreign components and maintain sovereignty through operational controls. So they're really just trying to see what's out there. And that closed at the end of September. So I think

they're now kind of at the point where they're going back, discussing what they've learned, what's realistic before returning with a request for proposals, you would assume. So a lot of proposals out there. But, you know, Joe, you said that the big players here are the U.S. companies. And it makes me think, you know, are we behind in Canada? Like, shouldn't we have been thinking about this way before now? Arguably, yes. I mean, it usually takes some kind of external shock, you know, for people to wake up about

this issue because it is kind of a nebulous topic. and it, you know, companies like, you know, Microsoft and Amazon and Google, like, they've been in Canada for a while offering these services without, you know, too much controversy. So, like, people didn't have a reason to consider this seriously before. It, again, like, it does, comes in waves. Like, when the U.S. passed the Patriot Act after 9-11, like, there was a data sovereignty discussion then. But it kind of died off a little bit. Yeah. Yeah. And it's been, I think Europe has been, bit ahead of Canada on this. But yeah, arguably, sure, could have happened sooner, but it is happening now. So AI minister Evan Solomon has said we may need to rely on foreign companies for help to make Canada's digital space more sovereign. Pippey talked a little bit about this. And Open AI recently offered to help us build this sovereign infrastructure. And just last week, United Arab Emirates signed a deal with Canada to collaborate on AI and data infrastructure. So help me understand, like, how can we build sovereign infrastructure with

foreign involvement? Yeah, that's where it gets confusing. So Evan Solomon has this, it's a bit of a catchphrase. He says it a lot in speeches, and it's almost like a Zen Cohen because it's like contradictory. But sovereignty does not mean solitude. There's just certain aspects of this that Canada cannot do. We don't have the Canadian companies. Like, we don't have an Nvidia here. The whole AI industry depends on Nvidia for

the GPUs. Graphics processing units, which are the chips that power AI models. They're tailored for AI, essentially. And they're in incredible demand. Nvidia is an incredibly valuable

company. Based in the US. Based in the US. So we need those chips, right? And chips have become really political, in fact. Like, you've seen how the Trump administration is now taking a percentage of Nvidia's sales to China. The government took a stake in Intel, right? These are things that are not typically what you would think a Republican government would do. This is more like state-run capitalism.

And there's a legislation underway in the U.S. now about priorities. advertising sales of GPUs to American companies over exports. Now, that seems to be directed at China for competitive security reasons, but you can see, you know, well, maybe they target other countries for some other reason. So Canada has to keep that relationship there, for one thing. And also, like, the cost of building these facilities is really high. You're likely going to have to turn to foreign sources of capital to get it done. We'll be right back.

Pippo, we've been talking a lot about security issues, but there's also opportunity here for Canada. So what are the economic implications of this digital sovereignty? They could be pretty sizable. So just to kind of give you a sense, for example, as of January this year, about 60% of Canada's cloud market, which includes the federal government, was controlled by about five American companies. So between 2021 and 2022, the government of Canada spent nearly 300 million on contracts with Microsoft Canada, for example. The same year, it spent about $515 million on contracts with IBM Canada, which is another like digital services company. So that's only a couple of companies, but it kind of gives you an idea of like just how much of the market there is.

And, you know, if we were able to diversify away from our dependence on those big U.S. companies, which is kind of up to debate as to how much we should or can, but kind of gives you a sense of just how big those contract could be. And then on top of that, you know, if we were able to strengthen this sector at home or perhaps open more of these centers or have more opportunity here, there's, you know, a number of jobs that could be created as well for Canadians who might, you know, graduate with skills that are applicable to this sector and then maybe look to the U.S. us or some of those U.S. companies for a place to go. With that in mind, Joe, are there Canadian companies that are stepping forward to rise to this digital sovereignty challenge? Yeah. So Bell and Tellis, notably, the telecommunications companies are really jumping on this in terms of AI. So Bell has plans for six AI data centers over the next few years, and it calls this its sovereign AI fabric. Telis already converted one. of its data centers to handle AI and has plans to do so for another one.

And so it calls these things it's sovereign AI factories. Very great names. They're just data centers, really, when it comes down to it. But yeah, their argument is that, like, we're Canadian, these facilities are in Canada, we control them, that is sovereign. They're approaching it slightly differently in terms of how they operate these things. I think they would both argue that one is more sovereign than the other in a way. there's definitely a competition among some companies in the space to be like the most sovereign.

So they're there. And recently there was basically like a coalition of Canadian companies that came out and said we can provide like the first end-to-end sovereign AI government cloud. What does that even mean? Well, it means that these Canadian companies control different aspects of this. So you have a company that builds the physical building and secures the power for it. There's another company that assembles some of the equipment that goes inside the data center. There's two other companies that work at like the software cloud level. So there's a lot of Canadian ownership and control.

The most sovereign of sovereign. The ultimate in sovereignty is the argument. Yes. So they are clearly going for that government business. How are American companies reacting to this? So it's interesting. So like Microsoft, like we said before, you know, makes arguments about data being at risk. You know, they would argue, well, that's not entirely sound.

That's not how things work. Google is offering what they call sovereign cloud solutions as well. And so the way that they're approaching that is through different technical and operational measures to protect data. So one thing they do, or they say is, well, like, data can be encrypted. And we give the customer in Canada the key to decrypt that data. So we can't provide any useful information to government because, like, we don't have the encryption key. So they're arguing, like, that's a mechanism to protect data.

If you're concerned about that, you know, how that argument lands ultimately will see, you know, the American companies are in a bit of a awkward situation. situation, because again, like, they have been here for a while, and now they're kind of viewed with suspicion because the factor is, you know, beyond their control. We talked about us a little bit before, but let's just like hammer down. Like, why don't we have these sovereign tech companies here already? Well, arguably, we do have them that operate at, like, different points along the data center supply chain. It's just that they're not at the scale of some of the U.S. companies. It's a very expensive industry.

It takes billions of dollars to build these things. You need a lot of funding. And American companies have just been doing it for much longer, and they have way more resources at their disposal. And they're quite well-entrenched and reliable within Canada. If you think about it from a customer point of view, are they going to go with Microsoft, which is very well-known and reliable? Or are they going to choose an upstart Canadian?

company that doesn't quite have the track record. So it's a challenge to grow in this industry. And, you know, again, because there hasn't sort of been this external shock where everybody's worried about sovereignty all of a sudden, you know, these Canadian companies haven't had that boost yet. Yeah. And I would just add, like, if you think about, I mean, I mentioned before, like how much money the government of Canada spends on contracts with companies like Microsoft and just

like Joe said, like how entrenched. they are because they're good at what they do, you know, it's no secret that government is a slow-moving entity. And if you think about like the transformation and the effort that it's going to take to actually detangle some of that integration that we currently have with these companies, like that's no small feat in terms of bureaucracy and making those changes. So after what you've both laid out, it does sound like a more sovereign digital space can be a good thing. But is it actually possible? Yeah, I mean, to an extent, right?

Like, I think as we've kind of been discussing sovereignty, it's not either or. It's a bit of a scale. So for sure, I think there are ways for the government to support Canadian companies here and building more sovereign infrastructure. To me, it's a question of like when you talk about the government's sovereign cloud that it wants to build. Like, how big does it want to go? How much money does it want to spend? and for what specific services and data, like there are certain kinds of data that, you know, relate to the military defense, national security, where it arguably is worth the expense and the effort to build the sovereign cloud.

It might not make sense to apply those standards to every form of data. Yeah, what Joe said rings true. When I spoke to Professor Heidi Tork for our story, she described sovereignty as like a dimmer rather than a light switch. So there's layers to it both on like the company's side and the government side of just how sovereign, sovereign can be or just how sovereign needs to be in terms of like actually having this come to fruition and how realistic this is. So yeah, I think deciding kind of what we need to prioritize in terms of actually making this happen, what types of data, what departments, that's all going to come down to how feasible this actually is. Well, Joe, Pippa, we'll leave it there. Thank you so much for coming on the show. Thank you. Thanks.

That was Pippa Norman, the Globe's innovation reporter, and Joe Costaldo, a Globe business reporter who covers AI. That's it for today. I'm Cheryl Sutherland. Kevin Sexton produced this episode. Our producers are Madeline White, Michal Stein, and Ali Graham. David Crosby edits the show. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening. Thank you.