The European Union (EU) stands at a critical juncture in its investments in Artificial Intelligence (AI). As a union of around 440 million people, with a €17tn GDP, it should be a global superpower in this area. However, in terms of both computing power and adoption, the EU is lagging, with many of its member countries ranking among the lowest in AI advancement.
Part of this challenge is that the EU’s sentiment, based on a strongly ethical worldview, represents the polar opposite of the US, which is pushing for more regulation rather than less. Meanwhile, its member countries lag behind the US, China, and even the UK in AI implementation skills.
The disruptions coming from the US around tariffs and deregulation have thrown one major issue into the limelight: the US holds far too many cards in the digital realm in computing power, software, research, and skills.
Closing the AI gap: The EU’s investment push
The other side to this coin is that the EU is making significant investments into AI research and development, with the InvestAI initiative announced in February 2025 to mobilise €200bn alone. Central EU initiatives are backed by other individual investments, such as France’s €109bn (around $112bn) investment that promises to be “the equivalent for France of what the US has announced with Stargate”.
€20bn of this InvestAI fund has been earmarked to deliver 12 AI gigafactories, four times more powerful than the ones in current operation. This investment in sovereign computing power for the EU is significant, as providing true AI independence from the US will only grow in importance.
The private investment and skills shortage holding the EU back
AI Investment in the EU also doesn’t have the advantage of the incredible levels of private investment that the US enjoys, with private companies investing $80.7bn in 2024 (versus $12.8bn in Europe). This private investment imbalance means that the EU has a couple of challenges.
First, the EU must scale its sovereign computing power – an area where it is already playing catch-up. At the same time, it must coordinate AI research and development while ensuring the EU AI Act evolves effectively. The other concern is digital skills in AI, being in short supply in many EU countries.
The existing 2024 AI Innovation Package also promised to provide initiatives to strengthen the EU’s AI talent pool through education, training and (re)skilling activities. Still, this talent pool will no doubt be tempted by a more unrestrained market in the US or even the UK unless the EU can provide sufficient agility in the field.
The EU AI Act and its global influence
Research institutions and academics have offered varying opinions on the Act, mostly acknowledging its significance as the first comprehensive legal framework for AI but with mixed views on its restrictiveness and potential impact on innovation.
Despite that, thanks to the scale of the EU and “the Brussels Effect”, as with the GDPR, the EU AI Act could eventually become a global de facto standard, as countries wishing to provide AI services within the EU, regardless of actual service location will have to follow the Act.
However, the Act will take some time to stabilise and, no doubt, as with the GDPR, there will be push-back from firms and the government in the US, with big tech working with the government to push back against any EU digital regulation.
The big picture: EU’s AI future amid global competition
It’s not all doom and gloom for the EU, as their big-picture focus on ethical and trustworthy AI development is seen by many as a longer-term competitive advantage. Building trust is key in an area of computing that has a somewhat chequered history and public opinion.
In the short term, the US and China will likely continue to dominate, with the US attracting more private investors, thanks to the more investor-friendly regulatory environment. Thanks to its position as third place in the AI arms race, and middle ground approach to regulation, the UK may well draw investment that would have otherwise gone to the EU.
In an ideal world, the UK and EU would form an AI coalition – pooling budgets, computing resources, skills, research, and development. However, given the current political climate, such collaboration remains highly unlikely.
Given the EU’s regulatory stance, its best chance at AI investment success may be in highly regulated sectors like healthcare and life sciences – where oversight and strict compliance align with EU priorities – rather than in less regulated industries like retail and media. The financial services sector, which is also traditionally keen on regulation, will be hit by the regulations within the AI Act but likely will embrace the trust-building nature of complying with it.
The road ahead: what’s next for AI in the EU?
As a global power, the EU should not accept its current position because it stands to gain greatly from the transformative potential of AI for its citizens, economy, and security. It needs large-scale sovereign computing power, world-class digital skills, and both public and private investment that genuinely materialises (and stays in the EU) to keep up.
Ultimately, the EU’s success in navigating this critical equilibrium will depend on its ability to act swiftly, continue to flex the AI Act in an innovation-friendly way, and remain open to change as the AI ecosystem evolves. Only time and investor euros on the line will tell if the EU’s stance was right both for AI sustainability and the EU’s economic activity.
