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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Canada | Publication | August 13, 2024
AI technology has evolved rapidly over the last decade, with a huge leap forward brought about by the advent of large language models (LLMs) that feature in conversational AI models, such as ChatGPT. Users can leverage ChatGPT to automate tasks such as research, software coding, and even text translation. AI use and consumption has subsequently experienced explosive global growth. In November of 2022, OpenAI launched ChatGPT and reached 1 million users in a single week. By January 2023, it had become what was then the fastest-growing consumer software application in history, gaining over 100 million users.
AI usage does not show any signs of slowing. The global AI market is currently projected to achieve a value of $891 billion CAD by 2028 and is expected to surpass the $1 trillion CAD mark by 2030. The AI market in Canada alone had an estimated value of $6.5 billion CAD last year, and is projected to grow at an annual rate of over 33%, reaching a value of over $28 billion CAD by 2028.
The explosive growth of AI carries with it the need for massive computing power. The World Economic Forum recently estimated the computational power required to sustain the rise in AI usage is doubling roughly every 100 days. This has private sector technology companies and nation-states alike scrambling to acquire sufficient computing power to ensure their continued ability to compete and thrive in the global AI marketplace. It is estimated approximately $46 billion USD was spent on the acquisition of AI-related servers in 2023 alone. This spend is expected to surpass $77 billion USD by 2027.
It is in this context that Innovation, Science and Economic Development Canada (ISED) recently launched a public consultation on AI computing infrastructure. As part of Budget 2024, the federal government announced a $2.4 billion CAD package to bolster Canada’s AI capabilities. As part of this investment, the Government of Canada is launching the Canadian AI Sovereign Compute Strategy (Strategy), and the AI Compute Access Fund (Fund).
Investments made as part of the Strategy are intended to provide incentives to organizations in Canada to develop and grow computing capacity, whereas the Fund is aimed at providing financial support to Canadian AI researchers and developers seeking to gain access to the computational power needed to support their AI-related initiatives.
The stated aims of the Strategy and the Fund include: (i) providing Canadians with access to leading-edge computing infrastructure; (ii) attracting global investors to the Canadian AI ecosystem; and (iii) growing Canada’s ability to attract and retain AI talent. It is currently contemplated that approximately $200 million will be allocated to supporting AI startups and adopting AI within critical sectors, such as manufacturing, healthcare, and agriculture. Approximately $100 million has been earmarked to assist small-to-medium sized business leverage AI solutions to increase productivity.
Such investments are taking place at a critical juncture in the global AI race. While Canada remains one the world’s top destinations for AI talent (it is estimated there are over 140,000 AI professionals currently active in Canada), Canada’s computational capability is at risk of falling behind that of most G7 nations. The Strategy and the Fund represent critical measures intended to reduce the gap in computational power that currently exists between Canada and its G7 peers.
Submissions for the consultation will be accepted until September 6, 2024.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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