Canada Sees Surge in Investment Plans Amid AI-Fueled Growth

Canadian businesses are increasing their investment plans, and artificial intelligence (AI) is playing a significant role in this trend. According to the Bank of Canada's second-quarter Business Outlook Survey, the net share of firms planning to raise machinery and equipment investment over the next year has climbed to 30%. This figure is meaningfully above the long-run average of roughly 16%, as flagged by National Bank.

The recent pickup in AI-related investment, particularly in data center infrastructure, is a key contributor to this trend. Data centers are the physical backbone of technology, consisting of buildings, power systems, cooling, and advanced computers. If this buildout continues, it could lead to increased demand in the near term and also pull in more imported equipment.

While AI is a significant factor, National Bank notes that other supports, such as easing trade frictions, firmer energy prices, and government incentives, are also contributing to the increase in investment plans. However, there is still uncertainty surrounding whether firms will follow through on these plans or hit pause due to various factors.