U.S. company to benefit from Canadian government funding for AI development
One name was conspicuously absent from the federal government’s official announcement of the first investment made through its sovereign artificial-intelligence compute strategy, a $2-billion program to help Canadian companies access and build the infrastructure necessary to train and run AI models and applications.
The press release issued earlier this month named only Cohere Inc., a Toronto-based AI company, as the recipient of up to $240-million to help build a multibillion data centre in Canada. The announcement did not mention that CoreWeave Inc., a U.S. company, would be building the data centre and is, in effect, the indirect recipient of the funding.
The inclusion of an American company in the very first round of funding from a sovereign program caught some experts and industry players off guard, drawing criticism. “It’s taking Canadian tax dollars and giving it to a foreign entity,” said Adam Hendin, the co-founder and CEO of Radium, an AI data centre company in Toronto. “We want to support Canadian, sovereign companies that are building this technology.”
The federal government first announced the $2-billion program in April to help companies access the graphics processing units (GPUs) and other infrastructure crucial to powering AI, as well as to encourage companies to build data centres in Canada. Many countries see the acquisition of GPUs and data centres as a matter of economic security, given the intense demand for computer chips and the potential for AI to transform economies.
In December, Innovation, Science and Economic Development announced further details of the program, including $700-million to build and expand data centres and $300-million to pay for the AI compute costs of small- and medium-sized businesses. The remaining $1-billion will be used to upgrade and build high-performance compute for academic researchers.
Just one day after ISED unveiled the details and invited companies to make applications, then-finance minister Chrystia Freeland announced up to $240-million for Cohere. “The Government of Canada, the people of Canada, together with Cohere, will be investing $240-million to get an AI data centre built,” she said at Cohere’s office in Toronto. She made only a glancing reference to CoreWeave in her remarks.
While the government described the $240-million as an “investment” in Cohere, that’s not entirely accurate. According to an ISED official, the money will be used by Cohere to purchase capacity for its own compute needs at the data centre that CoreWeave will build. The official said that the funding, along with an undisclosed commitment from Cohere, helped give CoreWeave the confidence to build a data centre in Canada. Cohere came to the ISED with the proposal, and brought CoreWeave into the process. The department saw it as an opportunity to act quickly, according to the official.
The data centre, which is set to come online in 2025, will have capacity for other Canadian companies as well.
Another person familiar with the matter said that Cohere ran a competitive process before partnering with CoreWeave.
The Globe and Mail is not identifying the sources because they are not authorized to speak publicly.
“All of the value and wealth effects of the $240-million look to be captured by a U.S. firm but paid for by Canadians,” said Jim Hinton, an intellectual property lawyer and senior fellow at the Centre for International Governance Innovation. “Simply buying compute capacity doesn’t make Canada richer or better at generating, retaining, and commercializing AI.”
Cohere declined to comment, while CoreWeave did not reply to a request for comment.
“It does leave out Canadian data centre providers, infrastructure and semi-conductor firms, which is troubling,” said Graham Dobbs, a senior economist with the Dais think tank at Toronto Metropolitan University.
CoreWeave stands to benefit in two ways. Not only could Cohere spend up to $240-million for compute at the data centre, Mr. Dobbs said, but Canadian companies that take advantage of the $300-million in subsidies for their own compute costs could then spend it at CoreWeave’s facility.
Still, the construction of the data centre does fill a need for Canadian companies. “If access to domestic AI compute for Canadian firms is the goal, it looks promising,” Mr. Dobbs said, adding that CoreWeave is a premium provider of these services.
CoreWeave could go public next year at a US$35-billion valuation, Reuters has reported. Cohere, meanwhile, raised US$500-million earlier this year at a US$5.5-billion valuation. Nvidia Corp., which will supply the GPUs for the data centre, is an investor in both companies.
Jonathan Ahdoot, who heads the cloud computing division at Hypertec Group Inc. in Quebec, said that while he was not expecting CoreWeave to be part of the announcement, he is not entirely surprised, given the company has established itself as a leading AI data centre provider. “There’s not a lot of them,” he said. Hypertec, meanwhile, is still an emerging player in AI. “If this was six months later, I think we probably would have gotten that contract,” he said. Hypertec is also in talks with ISED about its own proposals for the compute program.
Indeed, the Cohere announcement is only the first such funding arrangement, with more deals potentially forthcoming. “From supporting proposals with participation by Canadian AI infrastructure firms, to ensuring Canadian SMEs and AI champions get affordable access to the resulting compute, public investment will drive real benefits for Canadian innovators,” said Audrey Milette, a spokesperson for Innovation Minister François-Philippe Champagne.
At the very least, the government has made a sizable bet on Cohere as the country’s AI champion. The $240-million for Cohere’s compute costs is almost as much as the $300-million in subsidies available to small- and medium-sized companies under the program.
Cohere, founded in 2019, builds large language models that can underlie chatbots and other AI applications, which is very capital intensive. Cohere is up against deep-pocketed competitors as well, including OpenAI, Google, Anthropic and Meta Platforms Inc.
This article was first reported by The Globe and Mail
