TORONTO — The federal government is putting up $700 million to finance the construction of data centres in Canada, and will also back the building of a giant supercomputer in the country as it tries to shore up the burgeoning artificial intelligence sector.

Ottawa on Thursday announced its plans to spend $2 billion allocated for AI compute, the processing power needed to train and run machine learning models. 

Half the money will go to building “public” infrastructure accessible to researchers, companies and the government’s own operations. That includes a new large-scale facility, which Ottawa will contract a private firm to build and operate. The program will also provide $200 million in funding to grow existing clusters of servers owned by the National Research Council of Canada and the Digital Research Alliance of Canada, as well as by the three institutes that are part of the national AI strategy.

The federal government will also pay cloud service providers to expand their data centres in Canada. It is putting up $700 million to fund new facilities and build out existing ones, on the condition that the firms running them set aside significant capacity at reasonable prices for Canadian companies. 

The federal Strategic Innovation Fund will distribute the money. The program typically offers repayable financing for a part of project costs. Ottawa hopes to leverage its cash to attract significant provincial and private investments in the data centres, and will also favour operators that use new and energy-efficient hardware in the facilities.

Companies developing chips and other components have called for the AI compute program to take a “buy Canadian” approach, requiring cloud providers that receive public funding to buy from or help with R&D at homegrown hardware firms. 

AI startups, meanwhile, have pushed for Ottawa to spend as much of the money as possible on immediate subsidies for the processing power they’re already buying. Instead, the federal government is allocating a smaller portion of its compute funding to such supports, and will take longer than some developers hoped. 

The AI Compute Access Fund will launch next spring, and distribute up to $300 million in aid to firms in sectors like life-sciences, energy and advanced manufacturing. 

Tech executives and investors have identified the high cost and limited availability of processing power in Canada as a major barrier to founders starting and growing new firms. Researchers, meanwhile, say they need access to compute to conduct the science that drives AI discoveries, and test the systems developers release for safety. 

Cloud giants Amazon, Microsoft and Google are all expanding their data centre operations in Canada, while new homegrown challengers like Denvr Dataworks and Radium also build out capacity.

Ottawa’s planned supercomputer models a similar effort in the United Kingdom, although the new Labour government in August shelved plans for a £800 million facility at the University of Edinburgh.