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Business Investment Rebounds as AI Spending Accelerates in Canada, National Bank Says

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Canada's business investment outlook is improving, with Artificial Intelligence (AI) spending emerging as an increasingly important driver of capital spending, according to National Bank of Canada Capital Markets.

While easing trade tensions and stronger energy prices likely supported business confidence in the second quarter, the latest data suggest the recovery in investment intentions extends beyond these temporary factors, the bank said in a note earlier this week.

A key takeaway from the Bank of Canada's second-quarter Business Outlook Survey was stronger investment intentions. The net share of firms planning to increase machinery and equipment spending over the next 12 months rose to 30%, which is well above the 15.7% long-term average and the highest since US President Donald Trump's re-election in the US.

The improvement in business investment appeared to be driven by more durable factors. Federal incentives, including higher infrastructure and defense spending, supported capital investment while AI emerged as a key catalyst.

Trade data released on Tuesday pointed to a sharp pickup in AI-related investment, particularly in data center infrastructure, added the bank.

"After a slow start, AI investment finally seems to be taking off in Canada," wrote National Bank Senior Economist Jocelyn Paquet in the note.

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