Federal Budget 2024: AI Update

McCarthy Tétrault LLP


McCarthy Tétrault LLP provides a broad range of legal services, advising on large and complex assignments for Canadian and international interests. The firm has substantial presence in Canada’s major commercial centres and in New York City, US and London, UK.
he 2024 federal budget (the "Budget") contains significant measures to support the artificial intelligence ("AI") industry in Canada. The Budget includes new funding allocations...
Canada Technology
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The 2024 federal budget (the "Budget") contains significant measures to support the artificial intelligence ("AI") industry in Canada. The Budget includes new funding allocations for research, development, and implementation of AI technologies across diverse sectors, with dedicated measures for the establishment of regulatory frameworks supportive of AI safety and innovation, in addition to support for small and medium-sized businesses ("SMEs"). With such measures, Canada joins its international partners in using state resources to promote and guide the development of this cutting-edge technology.

AI Investments

Canada is strategically positioned to play an important role in the future of AI. Beyond its strong AI start-up ecosystem, Canada has played a key role in the research that has led to the development of modern AI, thanks in large part to the higher education hubs of Toronto and Montreal.

However, it has faced challenges in translating this expertise into applicative and business successes, especially in comparison to the United States which remains the world leader. The Budget recognizes that part of the issue stems from a lack of native computing power in Canada, a crucial component in the development of advanced models that power generative AI systems, for instance. For perspective, among its G7 counterparts, Canada possesses the least amount of publicly-available computing infrastructure and performance.1 To address the matter, the Budget dedicates $2 billion over five years to launch a new AI Compute Access Fund and the Canadian AI Sovereign Compute Strategy to support researchers, start-ups and scale-up business in accessing computational power while promoting Canadian-owned AI infrastructure. This represents a shift from Canada's earlier approach, whereby its 2021 budget earmarked only $40 million in funding toward computing capacity through the Digital Research Alliance of Canada.2 This revamped strategy follows the February 2024 announcement of the signature of a letter of intent between the Canadian government and Nvidia, which suggests part of the hardware behind this new compute may come from the US giant's famous AI chips.3

In addition, the Budget sets aside:

  • $200 million over five years to help startups bring new technologies to market and accelerate AI adoption in sectors such as agriculture, clean technology, healthcare, and manufacturing.
  • $100 million over five years to the National Research Council to help SMEs build and deploy AI solutions, with the potential for coordination with major firms.
  • $50 million over four years to support workers impacted by AI.

The Budget further allocates $3.5 million over two years to support the Global Partnership on Artificial Intelligence, a multinational initiative which promotes the OECD recommendations on AI.

Within Canada's technology industry, the recent amendments to the capital gains tax regime have also sparked considerable debate. The fiscal policy introduced in the Budget increases the inclusion rate for capital gains from 50% to 66% for businesses, effective as of June 25, 2024. This inclusion rate has drawn concerns relating to its potential to deter innovation and development, specifically in the context of the current high-interest rate and inflationary environment. More particularly, that such a fiscal measure could suppress investment levels and the influx of capital into the nation all the while potentially hindering the sector's growth trajectory. It remains to be seen if this adjustment in tax policy will inadvertently act as a disincentive for AI startups and dissuade private investment in the AI sector within Canada.

AI Safety and Innovation

Although those allocations are made to drive growth and innovation, the Budget includes measures to promote an AI ecosystem that is responsible and limits harmful practices. Consequently, the federal government will set up an AI Safety Institute with the mission to mitigate the risks associated with advanced AI technologies. It will be designed to serve as a national center for safety standards, research and development of best practices.

The Budget also proposes to provide $5.1 million in 2025-2026 to ensure a potential Canadian AI and Data Commissioner Office (the "AI Commissioner") has sufficient resources to enforce the Artificial Intelligence and Data Act ("AIDA"). This AI Commissioner would be created by AIDA, but this act is currently undergoing clause-by-clause review in the Federal parliament as part of the broader Bill C-27. For more on AIDA, please see our other blog here.

Global Overview: AI Investment Beyond Canadian Borders

Public Investment in AI Computing

Internationally, other states are also marshalling public investments and policies to build strong AI computing infrastructure. For example, the United States and Japan have both pledged billions of dollars within the last two years to bolster their domestic AI computing chip production. The European Union's (the "EU"), for its part, will invest $10 billion CAD in AI until 2027, with $3 billion CAD allocated toward expanding AI computing capacity across member nations.4 In Finland, a measure to mitigate the significant initial and operational costs of public AI computing infrastructure investment has been implemented by ensuring that 20% of the LUMI supercomputer's capabilities are accessible to the country's AI industry, through partnerships with research institutions. Finally, the UK has also announced of grants for AI computing infrastructure, totaling up to $900 million CAD for domestic organizations capable of hosting and operating a minimum of 2,000 GPUs.5

Harnessing Budgets for Public Investment in AI

Canada is also following the lead of its international partners when it comes to supporting the AI industry outside of compute.

South of the border, the White House's recently announced fiscal year 2025 budget provides for over $3 billion USD across agencies to responsibly develop, test, integrate and procure AI applications across the federal government. The $3 billion USD would also support the implementation of the Administration's executive order, while an additional $300 USD million in mandatory funding to increase agency funding for AI is also provided for to address major risks and to advance its use for public good.6 Indeed, the White House's budget also invests $20 billion USD across major research agencies that support regional innovation programs in emerging technology such as AI.7 Finally, the White House's budget provides for $70 million USD for the creation of agency "Chief AI Officers."8

The United Kingdom's recent budget announcement accounts for a £100 million funding investment toward the Alan Turing Institute, which serves as the national body for artificial intelligence and data science. Additionally, the budget allocates £7.4 million toward a flexible AI business upskilling fund, which aims to help SME's develop AI skills of the future.9

The EU's long-term budget framework for the Digital Europe Programme, which runs from 2021-2027, also includes substantial funding for the deployment and best use of AI. In 2024,10 the budget programming accounts for €835.3 million.11 Similarly, the EU's Horizon Europe Programme, which supports technological and societal aspects of AI development and deployment, has a budget of €95.5 billion planned for the 2021-2027 period.12

Corporate Investment in AI

As a final point of comparison, the private sector is also investing heavily to access the compute needed to develop cutting edge AI systems. Private investment in AI is largely centralized in the United States, eclipsing the contributions of all other countries.13

Some important private sector company also compete directly with nation-states when it comes to investments in compute. Recently, many prominent companies have made significant investments in AI technology. Among the most notable, lies Microsoft's announcement of a $2.9 billion USD investment in Japan to expand AI and cloud infrastructure,14 followed by Oracle's $8 billion USD over ten years for cloud and AI computing infrastructure in the same country.15 Microsoft has also pledged an investment worth £2.5 billion in the UK over three years to drive AI growth.16 Similarly, Amazon's cloud unit recently announced a $10 billion USD investment into data centers in Mississippi amid growing demand for cloud services given the increased adoption of AI services.17 Finally, Amazon has made a resembling investment in Saudi Arabia worth $5.5 billion USD, to support its data centers in light of the growing adoption of AI technologies.18

When taken as a whole, those public and private investments build the foundation for economies that will increasingly depend on AI technologies for growth and progress in the years to come. But beyond mind-bending compute capacity, AI implementation will also depend on organizations implementing appropriate change management, innovation and governance practices. McCarthy Tétrault's Cyber/Data Group is keeping constantly up-to-date on the best AI governance practices and is ready to assist you in your responsible AI efforts.


1 Graham Dobbs and Jake Hirsch-Allen, "Can Canada Compute: Policy Options to Close Canada's AI Compute Gap", (2024), p. 5.

2 ISED, "Pan-Canadian Artificial Intelligence Strategy", (2022), online.

3 Global News, "Canada Signs Letter of Intent with AI Giant Nvidia During CEO's Toronto Trip", (2024), online.

4 Dobbs and Hirsch-Allen, p. 18.

5 Ibid, p. 19.

6 White House, " Fact Sheet: The President's Budget Advances President Biden's Unity Agenda", (2024), online.

7 White House, "Budget of the U.S. Government, Fiscal Year 2025", (2024), online, p. 24.

8 White House, " Fact Sheet: The President's Budget Advances President Biden's Unity Agenda", (2024), online.

9 UK Government, "Spring Budget Puts UK on Fast Track to Becoming Science and Technology Superpower", (2024), online.

10 The work programme for 2024 is subject to an amendment which will establish the budget allocation for each action and which will determine the climate contribution for the 2024 year.

11 European Commission, " Digital Europe Programme – Performance", (2024), online.

12 European Commission, Directorate-General for Research and Innovation, "Horizon Europe, Budget: Horizon Europe - the Most Ambitious EU Research & Innovation Programme Ever", (2021), online.

13 Stanford University Human Centered Artificial Intelligence, "14 Reuters, "Microsoft to Invest $2.9 Bln to Expand AI, Cloud Infra in Japan", (2024), online.

15 Reuters, "Oracle to Invest over $8 Billion in Japan in Cloud Computing, AI", (2024), online.

16 Reuters, "Microsoft's $3.2 Bln UK Investment to Drive AI Growth", (2024), online.

17 Reuters, "Amazon's AWS to Invest $10 Billion for Two Data Centers in Mississippi", (2024), online.

18 Reuters, "Amazon's AWS to Launch Saudi Arabia Data Centers, Invest Over $5.3 Bln", (2024), online.

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