Why Canadian companies are investing in U.S. data centres?

"Elbows Up!" To the Canadians reading this, there is no question about the popularity of this statement that has fueled the country in the past year and a half. But while many Canadians try to keep their money within the borders, some of this country's banks and pension plans are investing in American-based data centre projects.

This investment strategy, although not as patriotic in current times, is one that fuels high returns. As Tony Frost, Associate Professor of International Business at Ivey Business School, said, pension plans and investment corporations, even if wholly Canadian-owned, are looking for the highest yields on the dollars they invest. The Canadian Pension Plan Investments Board, the governing organisation that invests money for the public CPP, has invested in various large data centre projects.

This includes a debt investment of USD $300 million for the development of Elon Musk's xAI mega data centre in Memphis, Tennessee. Additionally, the board has entered a USD $15 billion global partnership with California-based Equinix and Singapore's GIC to develop and scale hyperscale data centres in the U.S.

"Through this joint venture, we look forward to providing the funding needed to develop state-of-the-art digital infrastructure across the U.S. alongside our like-minded partner, CPP Investments," said Goh Chin Kiong, Chief Investment Officer, Real Estate at GIC, in the Fall 2024 announcement.

Frost's argument: "The question flips to why isn't Canada a more competitive site for them to make more Canadian investments."

Jason Kroft, Head of Structured Finance and Securitisation at Gowling WLG, emphasised that in order to get higher on the investment appeal list, Canada needs to make its regulatory environment more approachable to companies looking to get things done fast - a well-needed attribute in the world of AI. 

"[The U.S.] has been able to find a way to get things done quickly at scale, and take it from concept to construction very fast. In a space that's kind of moving very quickly, the hyperscalers, the Googles and the Metas of the world want this done tomorrow. The U.S. has proven to be a good place for this, and the capital has followed," he said. 

There's also an additional competition factor in the U.S.; many of the 50 states compete for data centres, which in turn would bring investment to communities from big tech players, as Frost noted.

Nick Sciple, Senior Analyst at Motley Fool Canada, said he sees Virginia and Texas as "ground zero" for data centre construction in the U.S. According to Pew Research Centre, while the former has 287 planned projects, Texas, which has 170 in the works, is seeing some benefit from working with gas power providers.

Last month, Chevron signed a two-decade power exclusivity agreement for Microsoft's two-gigawatt West Texas data centre. First power is expected by 2028.

"Chevron working with Microsoft to bring data centre capacity and natural gas supply to bear, you know, in West Texas near where the kind of production fields are ... if you think about it, the Texas power market is unregulated, so that opens up some opportunities," said Sciple.

While it's not only investment funds that are taking advantage of the possibility of higher yields south of the border. Canada's big six banks have continued to flood portfolios with related holdings over strategic investments.

Big data players invested by Canadian institutions have typically strayed from Canadian projects. Meanwhile, Canadian banks have diversified with American tech holdings. According to the most recent 13F filings in the U.S., the Royal Bank of Canada holds over USD $13.7 billion in Microsoft stock while TD Bank holds over USD $1.5 billion as of March 31, 2026. Both banks list the tech company as a top holding.

Meta is also among the top stocks in the banks' portfolios.

The recent announcement of Meta's one-gigawatt data centre in Alberta has shown increasing U.S. company interest in Canadian land for their projects. 

"[Alberta] is very pro-investment. They have a competitive tax regime, but they're not playing the subsidy tax game that we tend to play in things like manufacturing," added Frost. "'Build your auto plant here, and we'll give you X billion dollars.' They're not playing that game. Rather, they are setting themselves up to be a great location for behind-the-metre power guarantees."

One step includes the federal government's CAD $2.4 billion investment into computing infrastructure and a proposed CAD $15 billion loan and investment program, both announced in Budget 2025. Alberta is becoming a frontrunner with the increasing data centre boom, with easy access to natural resources, competitive tax rates, and a more "business-friendly" regulatory environment.

"Sophisticated, seasoned data centre developers have to increasingly come to Canada and find this to be a good place to do business. That means the regulatory and legal environment has to anticipate everything from, how do you procure land in order to access the space you need for a data centre? What are the regulatory, municipal, and other land use planning that might be constraints? What are the tax incentives to cause somebody to want to deploy this kind of capital? So when all of the regulatory, tax and the municipal planning come together, and the financing solutions are diversified, then you have the building blocks to do this successfully and at scale," added Kroft.