TORONTO — The federal government will set up a $500-million fund to finance Canadian technology firms and may take stakes in some of the companies as part of its updated national AI strategy, The Logic has learned. The plan also includes hundreds of millions of dollars for AI adoption, commercialization, compute and research.

The new Canadian Tech Growth Fund is designed to “close the scaleup capital gap facing Canada’s most promising AI companies” and help keep them in the country, according to a version of the strategy obtained by The Logic. It could also take equity in “the most promising Canadian AI firms.” The document says the government may also use its recently announced $25-billion sovereign wealth fund to back “emerging national champions.”

Ottawa is also planning to add $700 million of new funding to the AI Compute Access Fund, which helps firms pay for the processing power they buy from cloud service providers. The oversubscribed program has so far awarded $66 million of its $300-million budget to 44 companies, including venture-backed tech firms like Basetwo, EarthDaily and Vendasta.

Canadian small and medium-sized firms currently have “no affordable domestic option” to buy the processing power they need to build and run AI tools, according to the government’s strategy document. As a result, such companies are using foreign cloud platforms, “sending Canadian dollars offshore and placing their most sensitive data and intellectual property outside Canadian jurisdiction.”

The strategy, which is expected to be announced Thursday, proposes using BDC’s new LIFT program, a $500-million initiative announced in April, as one of the tools to help Canadian businesses adopt AI. A BDC report published Wednesday found that just 30 per cent of Canadian SMEs currently use generative tools, with non-adopters leaving some $150 billion in GDP on the table. 

BDC’s chief information officer Jean‑Sébastien Charest told The Logic in an interview earlier this week that the LIFT program could help close the chasm between current adoption rates and Ottawa’s goal. Charest said adoption alone, however, isn’t enough to realize the productivity gains AI could create.

“If you want to really move the needle on getting the full benefits, you need to be intentional,” he said, adding that LIFT is designed to move businesses beyond experimentation and side projects by identifying specific problems where AI can help companies be more productive and competitive.

The strategy also adds $500 million to an AI program run by the seven federal regional development agencies that helps firms pay for work to adopt and commercialize AI. The initiative offers repayable funding of between $125,000 to $5 million, depending on the province and the project.

The AI strategy identifies five “priority” sectors where the technology can make the most impact, and in which it claims Canada already has scientific, economic and industrial strengths. They include health and life sciences, energy and natural resources, transportation, agriculture, and manufacturing and robotics. The strategy says AI can help drive productivity and efficiency in those industries. 

Ottawa plans to “prioritize dual-use applications” in its investments, citing its new Defence Industrial Strategy, which aims to boost the development and deployment of technology with both military and civilian applications. 

The CBC first reported some details of the AI strategy on Monday, citing a draft version of the document. 

Taking direct stakes in firms via the new growth fund would mark a change in approach for Ottawa. The federal government has typically provided startups with loan-like financing through support programs like the Strategic Response Fund, or grants via schemes like National Research Council Canada’s popular Industrial Research Assistance Program. Successive federal governments have also tried to increase the amount of money available to startups through venture capital programs to indirectly or directly seed funds that back tech firms.

On top of the new growth fund, the strategy references the $1.75 billion Ottawa announced in the 2025 budget to draw in more private investment for innovative companies. 

That is a reference to $1 billion in funding for the government’s flagship venture capital fund, called the Venture and Growth Capital Catalyst Initiative, plus $750 million for “early growth-stage” funding. Investment industry groups have spent recent months making the case for how that $750 million should be spent, with some saying it should be used at the earliest stages of growth and others at a later stage to help companies scale.

The AI strategy warns of “funding gaps at all investment stages” among Canadian startups, arguing the gaps could push companies, talent and intellectual property out of the country.

Ottawa is also proposing to expand a long-standing program designed to help universities recruit and retain top AI researchers. It aims to increase the number of AI chairs, which help AI institutes and schools pay for faculty and their labs, from 143 today to nearly 200. The government will also provide $130 million for programming at the three national AI institutes to help commercialize research discoveries.

The program, which is managed by the Canadian Institute for Advanced Research (CIFAR), formed the core of the original national AI strategy, announced with $125 million in funding in March 2017. In April 2021, Ottawa extended the chairs initiative with another $162.2 million, and added $60 million for the national AI institutes for commercialization. Last July, CIFAR and the three national AI institutes proposed a $434-million renewal package to expand the research and business support programs and set up a new venture fund.