Canada has avoided a single, formal definition of “sovereign AI,” allowing its meaning to be shaped instead by a series of policy decisions. Recent announcements surrounding federal funding for data-centre expansions, support for domestic cloud partnerships, and assurances around data residency have each been presented as evidence of sovereignty in action. Taken together, these moves show that sovereignty is being applied unevenly—attached to different initiatives on different terms, without a clear or consistent standard for what qualifies as sovereign and what does not—a pattern that carries consequences for Canadian founders.
The label of “sovereignty” is being applied to AI through a narrow set of criteria.
Federal officials have been explicit about what is at stake. AI Minister Evan Solomon has framed the rise of AI as a structural inflection point, likening it to a Gutenberg-scale shift in how power, knowledge, and economic value are organized. In that view, AI systems, and the data used to train and operate them, are better understood as being foundational to Canada’s resilience, economic competitiveness, and long-term national capacity.
In practice, the label of “sovereignty” is being applied to AI through a narrow set of criteria. At the groundbreaking of Nokia’s Ottawa expansion, Solomon described the project as what “sovereign AI… looks like in practice,” while emphasizing Canadian employment, research activity, and deployment from Canada to global markets. The same logic underpins recent federal support for Microsoft’s data-centre expansion and Cohere’s compute capacity, where sovereignty was demonstrated through the projects’ domestic footprints rather than through ownership or operational control.
Taken together, these examples establish the practical threshold for what currently “counts” as sovereignty in Canada. Infrastructure located in Canada, domestic hiring, and local capital investment are sufficient to clear that threshold as it is currently being applied. Questions of authority—who controls administrative access, who holds encryption keys, and which legal regime ultimately governs the operators of critical systems—are largely left unaddressed. Ensuring data is located in Canada is currently being treated by policymakers and public funders as enough to qualify as sovereign and is often rewarded, while designing systems to retain technical and legal control falls outside what policy currently evaluates or incentivizes.
In practical terms, this threshold is shaping how companies are built. When sovereignty is assessed through footprint rather than authority—understood as who has the final say when systems fail, disputes arise, or external demands are made—speed and integration become the dominant advantages. For founders, the rational response is to deploy quickly on established global platforms, localize operations, and meet residency and hiring requirements that are easy for funders and procurement bodies to verify. Governance decisions that determine who ultimately controls a system are more likely to be deferred, not because they are unimportant, but because they fall outside what the current policy framework prioritizes.
Who controls infrastructure controls information
Less visible are the architectural consequences of this incentive structure for Canadian startups. When governance is not made a clear priority through policy, control over encryption keys, administrative privileges, incident-response authority, and legal exposure defaults to the infrastructure provider—which in most cases is foreign-owned and subject to foreign law—rather than being designed into the company itself.
This means that if a foreign law-enforcement or national-security request is directed at the operator of a cloud platform hosting Canadian data, the legal obligation to respond—and the technical authority to do so—rests with the operator, not with the Canadian company using the service, even when the data is physically located in Canada. Decisions about compliance, access, and system response are usually made early in a company’s development, driven by speed and cost. Those decisions rarely appear in funding announcements or press releases, yet they determine who has the final say when systems fail, disputes arise, or external demands are made. Over time, Canadian founders learn to treat sovereignty as something demonstrated through location, while authority over systems is effectively left to others.
Building with Canadian sovereignty in mind means choosing where a company’s data is stored and processed, who operates the underlying infrastructure, and which legal system governs it. On foreign-governed platforms, those choices are made for you.
Different types of companies emerge when sovereignty is evaluated through the lens of authority. Building with Canadian sovereignty in mind means choosing where a company’s data is stored and processed, who operates the underlying infrastructure, and which legal system ultimately governs access and control. On foreign-governed platforms, those choices are made for you. On domestically governed infrastructure, many of them are settled from the start, quietly shaping what kinds of customers a company can serve as the market matures. As Canadian procurement increasingly turns towards questions of control and accountability, authority-first companies will find themselves better positioned for that shift, while others will be forced to retrofit control after the fact, often within constraints set by earlier infrastructure and jurisdictional choices that an authority-first approach avoids. The trade-off is slower, less visible progress early on, but a decisive advantage once expectations around control and trust take hold.
The contrast is not theoretical. Canada’s investment in Cohere under the sovereign AI compute strategy illustrates the trade-off clearly. The funding was framed by Ottawa as building domestic AI capacity, yet the associated infrastructure is built and operated by CoreWeave, an American company subject to U.S. jurisdiction. The decision is commercially rational and expedient. But it also places meaningful operational authority outside Canada, even as the capacity itself is located inside the country. The sovereignty threshold is met, while key elements of control sit elsewhere. For founders watching closely, the lesson is not about Cohere’s intentions, but about the standard being applied: federal definitions of sovereignty can be met without retaining operational authority inside Canada.
Culturally Canadian, internationally governed
As companies scale, these choices compound. Expansion into the United States often brings new legal obligations, operational dependencies, and administrative access pathways. A firm can remain culturally Canadian while critical system functions become governed by foreign legal processes. Without separation designed early, growth itself can narrow the set of customers a company can credibly serve—including Canadian public-sector and regulated buyers in health, government, and critical infrastructure, where continuity, accountability, and jurisdictional control are non-negotiable.
That distinction matters at a national level. Authority determines where strategic decisions are made and where economic value compounds. Companies that retain control over their systems are more likely to anchor intellectual property, product roadmaps, and operational expertise domestically. By contrast, firms built tightly around foreign hyperscale infrastructure often integrate more easily into external platforms, making early acquisition both simpler and more likely. Over time, this shapes whether Canadian companies mature into durable platform firms or exit earlier—and whether the value created by Canadian data and talent compounds inside the country or flows outward. It also determines where deep operational expertise develops and whether Canada has the practical capacity to shape how critical AI systems are governed over time.
Canada does not need to eliminate foreign participation in its technology sector. Interdependence is a reality of modern infrastructure. What remains unsettled is how clearly the country distinguishes between participation and authority, and how consistently that distinction is reflected in policy and procurement.
Canada will get more of whatever it chooses to reward. If sovereignty continues to be measured through presence alone, companies will optimize for quick deployment. If control becomes part of the standard, a different kind of ecosystem will follow—one built to last.
The opinions and analysis expressed in the above article are those of its author, and do not necessarily reflect the position of BetaKit or its editorial staff. It has been edited for clarity, length, and style.
Feature image courtesy Unsplash. Photo by Jason Hafso.