OTTAWA — Microsoft will spend $7.5 billion on Canadian data centres over the next two years, and is pledging to protect Canadian data from other governments, including that of the United States.

“We’re loyal to Canada. We’re loyal to the United States, where we’re headquartered. But we also know that we need to stand up for our customers, because if we don’t, then our business does not have the future it needs to have,” the Seattle-based computing giant’s president and vice-chair Brad Smith said in an interview.

The $7.5 billion is to be spent expanding capacity at Microsoft’s two Canadian Azure “regions”—Canada Central in Toronto and Canada East in Quebec City—and adds to $11.5 billion in investments by the company since 2023. But there’s more to the promise than chips and cooling equipment.

The advanced language models of Canadian AI champion Cohere will be available worldwide in Microsoft Foundry, its toolkit for developers making their own AI applications, the company said. That’s meant to help Cohere expand globally.

And then there’s digital sovereignty.

Prime Minister Mark Carney has put development of a sovereign computing cloud on his Major Project Office’s to-do list, though the government has found that defining “sovereign” isn’t easy.

Bell CEO Mirko Bibic, who’s led his company back into the data-centre business, has argued that Canadian AI sovereignty must mean Canadian ownership and control from top to bottom. Canada’s Cohere and France’s Mistral are benefiting from customers’ preferences for non-American artificial intelligence tools. Nevertheless, U.S. AI and computing providers, Microsoft included, are making their cases that they can meet other countries’ sovereignty demands.

Smith is due in Ottawa on Tuesday to launch a “threat intelligence hub” to boost cybersecurity links with the Canadian government. It’s one of several ways Microsoft aims to convince Canadian customers to trust it despite the U.S.-initiated trade war, President Donald Trump’s talk of annexation and a new national security statement from the White House that talks about U.S. “preeminence” in the Western Hemisphere.

Together, Smith said, they make up “the most robust digital sovereignty plan that we have announced anywhere.” The package builds on commitments Microsoft made to the European Union in April and “feedback we’ve gotten from Ottawa,” he said.

Other measures include:

• increasing options for keeping data on Canadian soil when using Microsoft tools like its Copilot assistant in Microsoft Office,
• installing the company’s Azure cloud-computing system on customers’ own machines and on their own premises and
• writing into contracts that Microsoft will challenge any government demand for Canadian data where it has legal grounds to.

Microsoft also promises “to rigorously defend the uninterrupted operation of cloud services for Canadian government customers” and fight any order to suspend its operations in Canada—which might be more ominous than reassuring.

Microsoft has walked a line with the Trump administration. Through CEO Satya Nadella and co-founder Bill Gates, it has participated in a group show of subservience to the president and donated to his inauguration. Yet Nadella wasn’t among the tycoons at the ceremony last January, and has not personally delivered presents to the Oval Office like, say, Apple’s Tim Cook.

Smith said the company is willing to fight when politics and diplomacy fail.

“We sued the Obama administration four times despite having an excellent relationship with them. Fundamentally, all of those lawsuits were about the protection of customer privacy, including the privacy of customers outside the United States,” he said. ”We sued the first Trump administration around issues like immigration. We took that all the way to the Supreme Court.”

The promise to go to court is somewhat limited. The U.S. CLOUD Act of 2018 spells out that U.S. law enforcers can get access to data held by U.S. companies anywhere in the world.

Smith’s answer to that is an option to encrypt customer data on Microsoft servers even while they’re processing it. “Companies and others are able to protect their data so that even if the data goes somewhere, it is not accessible, it can’t be read or understood,” he said.

Despite the particular tensions (“the changing nature of the dialogue,” as he put it) between Canada and the United States now, digital sovereignty is a wider battle, Smith said.

He pointed to a legal effort by the RCMP to get certain foreign data held by French cloud provider OVHcloud by serving a production order on its Canadian subsidiary. OVH risks contempt charges in Canada if it doesn’t disclose the data, and fines under French law if it does.

“This isn’t just an issue between Canada and the United States. It’s an issue between governments everywhere,” Smith said.