Europe, long known as more of a tech regulator than an innovator, is moving with renewed urgency to claim its piece of the global AI boom. — AP
In June, French president Emmanuel Macron held an exclusive dinner at the Élysée Palace with a special guest: Nvidia’s Jensen Huang. Wine glasses clinked in honour of a deal his company had just unveiled with Mistral, the leading French artificial intelligence startup, to develop France’s largest data centres.
Huang, dressed in a black t-shirt amid the Parisian suits, paused the celebrations for a brief warning about AI. “The problem in Europe and in France is: You are too slow,” Huang teased the attendees, according to Eléonore Crespo, an AI entrepreneur at the dinner. “It’s like your wine. You wait for it to age, to be perfect.”
Many European leaders are now working to prove Huang wrong. The continent, long known as more of a tech regulator than an innovator, is moving with renewed urgency to claim its piece of the global AI boom. Europe’s scarce tech giants, SAP SE and ASML Holding NV, have in recent weeks committed billions of euros to homegrown AI startups and services tailored to the bloc. Heads of state, from Macron to British Prime Minister Keir Starmer, have made splashy pledges to invest in massive data centres they cast as critical to national security and growth.
Europe’s push mirrors efforts around the world, from Canada to South Korea to the Middle East, where governments are frantically marshalling resources to avoid ceding too much of the AI market to the US and China. Across Europe, there are fears that a failure to invest heavily in AI locally will mean losing talent and abandoning yet another tech revolution to Silicon Valley, according to interviews with more than two dozen policymakers and technology executives.
Increasingly, officials also worry Europe risks being overly reliant on a handful of large American companies, with its access to a vital technology vulnerable to Donald Trump’s trade war and whims. In Brussels, there are serious conversations about a so-called “kill switch” – a fear that Trump could force US companies to turn off services if that furthers his agenda.
But Europe, like most regions, has yet to prove it has the technical and financial wherewithal to credibly rival the US and China in every – or any – corner of the AI industry. Many see potential for European firms to sell AI-powered applications, cloud services and military tech. However, there are significant doubts about whether the continent’s sluggish economies can or should compete in the costly global battle to develop the advanced computing chips or cutting-edge large language models that underpin AI software.
Those debates are becoming more pronounced as governments simultaneously tout the importance of domestic AI efforts while leaning on US firms, including Nvidia and OpenAI, to prop them up. In September, for example, Starmer hosted Huang and other US tech luminaries to announce more than £31bil (RM174.82bil or US$41bil) worth of AI spending pledges – a move that prompted immediate criticism that the UK was handing over critical keys to the US.
“At this moment, Europe is so dependent that we don’t have much bargaining power,” said Alexandra Geese, a European parliamentarian from Germany who advocates shedding as much US tech as possible. “You become a colony.”
Made in Europe
Crespo, the entrepreneur, is a poster child of sorts for Europe’s emerging AI sector and its limitations. Her startup, Pigment, offers AI tools for financial planning to rival an iconic American product: Microsoft Excel.
During dinner gatherings and foreign trips, Macron has promoted Pigment as a future tech leader, driving “a new wave of customers”, she said, including large French and British businesses that are on their way to signing deals. But to compete with US products, Crespo relies on American tech – namely models from OpenAI, which counts Microsoft as its biggest backer.
“You are not going to be able to wait 10 years for a technology to be developed in Europe to say, ‘Oh, now we are sovereign’,” she said.
Nvidia’s Huang has been a relentless crusader for “sovereign AI”, a squishy, catchall term that typically means each country owns and controls the necessary data, chips and data centres to support AI. The idea has caught on in Europe, albeit sometimes in a confused way. In September, SAP announced a “sovereign” effort to offer “AI solutions that are built in Germany, for Germany”, by partnering with San Francisco-based OpenAI.
Increasingly, however, European companies are racing to prove local players can fill in the gaps. Nebius, an Amsterdam-based AI cloud provider, signed a contract with Microsoft Corp worth as much as US$19bil (RM80.27bil). Black Forest Labs, a German startup making AI image-generation tools, has partnered with Elon Musk’s xAI and Meta Platforms Inc. And Mistral recently raised funds from ASML and other investors at an €11.7bil (RM57.28bil) valuation, cementing it as Europe’s top AI model maker.
These firms are vying to reduce the need for US tech and ensure the continent doesn’t miss out on AI the way it did with online search, e-commerce, social media, smartphones and cloud computing. “Essentially what we are living through is the trauma of a lot of the regional leaders analysing their histories and going, ‘We don’t want a repeat of that’,” said Anjney Midha, a partner at Andreessen Horowitz and board member of Mistral and Black Forest Labs.
In a sign of the times, several newcomers have entered the AI chips market, a notoriously challenging field dominated by Nvidia. These companies argue the provenance of AI hardware is as vital as the data being processed or the models created. Nations without their own semiconductor firms or workforces “risk becoming a vassal state”, said Walter Goodwin, founder and CEO of Fractile, a British chips startup.
The push for homegrown alternatives has gained momentum due to concerns about Trump. In April, after the White House announced its first wave of global tariffs, the rhetoric in Europe intensified. The EU released its plan to become a “global leader” in AI, which includes subsidies for chips and large data centres, or “gigafactories.” Clara Chappaz, then France’s digital minister, gave a speech about cloud computing, calling on Europeans to “work as a pack” in a “world of predators.”
There is growing distrust in Europe, not only over tariffs but about the privacy and security of American services. A law passed in Trump’s first term, the Cloud Act, enables US law enforcement to request data from abroad. In June, Microsoft executive Anton Carniaux made waves when he told a French Senate inquiry he “cannot guarantee” information on French citizens would be protected if the US government demanded it. The executive said the company tries to fight these requests and there are no instances of this happening to a European customer.
Still, Benjamin Revcolevschi, the CEO of French provider OVH Cloud, said this wasn’t the first admission from a US firm. “There will be others.”
An emerging “Eurostack” political movement has argued that European entities should be required by law to purchase homegrown tech services. Geese, the German politician and a Eurostack proponent, believes that relying on less advanced alternatives to ChatGPT or Microsoft Azure is worth the technological independence. “We’re going to get there,” she said. “It’s not that we’re stupid. It’s just less investment.”
Macron, who has tussled with Trump over tariffs and Europe’s digital sovereignty, has done more than most to prop up local options. He’s pledged to spend €109bil (RM533.66bil) on data centres and equipment and regularly promotes startups like Mistral and Pigment.
In July, Macron brought several French entrepreneurs, including Crespo and Mistral’s Arthur Mensch, on a diplomatic trip to the UK. Despite its fractious exit from the bloc in 2020, the UK has kept knitting partnerships on critical technologies – including AI – with some of its European neighbours.
Peter Kyle, a British cabinet secretary, said the two countries have discussed pooling supercomputing resources and other partnerships. He’s also adopted Macron’s boosterism.
Still, last month, when the UK unveiled major investment plans on AI infrastructure, it wasn’t with French firms. It was with Nvidia, OpenAI and Microsoft.
Coming up short
For all the activity, Europe’s public and private investments are dwarfed by the US. The largest US tech firms are set to spend US$344bil (RM1.45 trillion) this year, largely on data centres for AI. The EU’s long-term AI investment plan calls for spending about US$100bil (RM422.50bil) less than that in total.
At a buzzing AI conference in Paris this summer, Paul Bloch, the president of Nvidia partner DataDirect Networks, brought up the EU’s plan to spend €20bil (RM97.92bil) subsidising data centres it calls gigafactories. “It seems like a lot,” he told the audience. “It’s really not.”
Whether there’s enough capital to compete is unclear. Economic growth is sluggish across Europe. Macron has just set up France’s third government since September, and that too is at risk of collapse over concerns about debt. And there are simply no European tech companies with the financial muscle of US firms like Microsoft, Amazon.com Inc and Alphabet Inc’s Google.
The limits of Europe’s AI push can be seen in France. Scaleway, a cloud provider from telecom billionaire Xavier Niel, has invested €3bil (RM14.68bil), most of it in AI data centres, and secured more than five thousand advanced chips, according to Aude Durand, deputy CEO of Niel’s Iliad Group – a tidy sum, but far less than American rivals. Durand said Europe’s political geography also makes it difficult to expand. “Every time you open a new market, there’s new regulation, there’s new constraints,” she said. “It’s not as easy as in the US.”
Even Europe’s top software company, SAP, can’t keep pace with the US investment frenzy. The firm, whose market cap is about a tenth of Microsoft and Google, said it would allocate €20bil (RM97.92bil) for sovereign services over the long term, a tenfold jump from its promised figure a year before. “The world changed,” explained Thomas Saueressig, an SAP executive. But that amount is less than some US tech firms spend in a quarter.
SAP has also wavered on its approach to sovereign AI. Christian Klein, SAP’s CEO, began the year calling for a replica of Stargate, the US$500bil (RM2.11 trillion) infrastructure project Trump announced with OpenAI. “Europe needs it the most,” Klein told CNBC in January.
But in an August op-ed, Klein called the EU plan to subsidise large centres and chips “a misguided solution to the wrong problem”. Instead, he said Europe should stick to its strengths: focusing on promoting AI software and applications. European data centres, even if run by a local operator, will still need equipment from Silicon Valley and Asia, Klein said. “The hardware train has left the station,” he wrote.
There are signs others in Europe agree. Last quarter, Nvidia attributed US$20bil (RM84.50bil) in annual sales to sovereign AI purchases. Britain’s new supercomputer, in Bristol, is being built in partnership with Nvidia. The company also had deals with cloud projects in Germany and Italy.
Europe isn’t ready to give up completely on building up its own infrastructure. Despite Klein’s position, the German government has endorsed the gigafactory plan, arguing that local cloud operators should be involved. The Schwarz Group, Germany's largest retailer, is planning to invest €11bil (RM53.85bil) into its nascent cloud service over the coming years and is bidding to develop one of the EU gigafactories. Unlike in chips, that market has more room for competition.
Macron also selected a British provider, Fluidstack, to develop a gigawatt supercomputing facility, with hopes to break ground on the data centre – the startup’s first – early next year. CEO César Maklary, a native of France, said his firm’s nimbleness and AI-first focus can help it beat US cloud giants.
“We’re deciding today what our future looks like. If we are handing the keys to non-sovereign companies, there's always a potential risk,“ he said. “There’s a French saying: You’re always better served by yourself.” – Bloomberg
