The Growing Threat of Technological Irrelevance for Europe
The European Union finds itself in a critical battle for technological relevance. In 2023, the United States led global AI investment with $67.2 billion, followed by China with $28.2 billion. In stark contrast, the EU allocated just $7.1 billion, amounting to only 8.3% of global AI funding.
This discrepancy represents more than a financial shortfall; it is a geopolitical crisis. Without robust AI capabilities, Europe risks becoming permanently dependent on U.S. and Chinese technology, forfeiting both its digital sovereignty and economic competitiveness. Despite producing 15% of the world’s top AI talent, nearly half of Europe’s best researchers leave for the U.S., lured by superior investment opportunities. Furthermore, no European company currently ranks among the top five global AI leaders.
The challenge for Europe is not only to regulate AI, but to foster the technological innovation needed to remain a leader in this transformative field. As a recognized thought leader in AI-driven business strategies and digital platform governance, I have advised Fortune 50/500 companies, governments, and industry leaders on navigating the complexities of AI, digital transformation, and MarTech architecture. My experience has highlighted the urgent need for a concrete AI industrial strategy to ensure Europe’s leadership in a rapidly evolving global landscape.
Recent Efforts to Bridge the EU AI Gap
In response to its declining position, the EU has made a series of strategic investments in AI research and infrastructure. These include:
OpenEuroLLM Project – The EU is investing $56 million (€37.4 million) to develop an open-source large language model (LLM) capable of processing all 30 official EU languages. This initiative, inspired by China’s DeepSeek, seeks to offer an alternative to U.S. AI dominance by funding top European researchers and leveraging supercomputing resources such as Spain’s Mare Nostrum and Italy’s Leonardo.
AI Factories Initiative – A $2.04 billion (€1.96 billion) initiative designed to enhance AI infrastructure and support startup innovation.
AI-Optimized Supercomputers – The European Commission has pledged €750 million to expand its AI supercomputing network, ensuring that European firms can train and develop advanced AI models without relying on foreign infrastructure.
Increased Research Funding – The EU has also raised its annual research budget by 25% to $1.5 billion and committed an additional $1.5 billion to upgrade Europe’s supercomputing capacity, strengthening the digital backbone necessary for AI competitiveness.
While these initiatives signal progress, they remain vastly insufficient compared to global competitors. The United States has committed $500 billion to AI infrastructure, while OpenAI alone is raising up to $25 billion in private capital. Even within Europe, private-sector AI startups like Mistral, which raised $640 million, are securing more funding than many EU-led initiatives.
The EU’s piecemeal funding approach raises concerns about whether these investments will translate into tangible competitive advantages—or simply serve as symbolic gestures in an AI race dominated by the U.S. and China.
Regulation Alone Will Not Make Europe an AI Superpower
As a long-standing Forbes Council member, recognized technology thought leader, and granddaughter of Franz Mendel—founder of the Munich Security Conference and European Security & Technology—I have been deeply engaged in discussions on European strategic policy. Today, however, the most pressing security challenge facing Europe is not military aggression, but technological irrelevance.
The EU has positioned itself as a global leader in AI regulation, with the AI Act, Digital Markets Act (DMA), and Digital Services Act (DSA) setting global standards for ethics, fairness, and privacy. However, regulation without a complementary AI industrial strategy will not enable Europe to compete with the likes of OpenAI, DeepMind, or Baidu.
A case in point: The AI Act’s strict compliance requirements have already led to major AI firms, including Meta and OpenAI, restricting the release of AI tools in the EU due to legal risks. Mark Zuckerberg and Spotify co-founder Daniel Ek have publicly warned that Europe’s “incoherent and complex AI regulation” could push the continent further behind in AI innovation.
The EU must recognize that ethical oversight is not a substitute for industrial leadership. While the AI Act ensures safeguards, it also risks hamstringing European AI startups while their American and Chinese counterparts operate under looser regulatory conditions, accelerating their dominance.
Techplomacy: A Diplomatic Solution to a Technological Problem?
In the absence of an AI industrial strategy, the EU has leaned into techplomacy—using diplomacy to shape global technology standards. Denmark was the first to appoint a Tech Ambassador in 2017, and France has pushed for stronger AI governance within international regulatory bodies.
But can techplomacy really make up for Europe’s lack of industrial strength in AI?
The EU has no shortage of regulatory influence, but without homegrown AI champions, its power remains limited to shaping rules rather than defining technological advancements. Regulation cannot replace the need for scalable AI infrastructure and innovation.
Can the EU Save Itself?
Europe still has the opportunity to regain AI leadership, but time is of the essence. The key challenges that must be addressed are:
Political Will: The EU must move beyond regulatory frameworks to develop an AI industrial strategy. The AI Act may set standards, but it also raises compliance costs that stifle innovation. Europe must shift from overregulation to innovation-driven investment.
AI Investment: With just €7.1 billion in AI funding, Europe must increase its AI investment to at least €20 billion annually to remain competitive. Without this, the best talent will continue to leave, and AI startups will struggle to scale.
Techplomacy vs. Industrial Power: Techplomacy is valuable but not sufficient. The EU must build its own AI platforms rather than rely on foreign technology, to secure a competitive edge on the global stage.
The Verdict: Act Now or Fall Behind
The next five years will determine whether Europe remains a key player in AI or becomes relegated to a secondary role, unable to influence the technologies that will shape the future.
The EU has the expertise, the institutions, and the economic power to be a leader in AI. However, without a clear, bold AI industrial strategy, it risks losing its competitive edge.
Techplomacy can help, but it cannot replace the need for strong investment, innovation, and the building of European AI platforms. Europe must act now—or face the consequences of falling irreversibly behind.
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