Although these European digital leaders have some of the highest GDP per capita in the world, they represent just 14% of the EU's total population and 18% of its GDP. But what these countries show is that the foundations for becoming European tech powerhouses are already there – they just aren't on a large enough scale yet.
While this is reason for optimism, we should not ignore the many factors that seem to be undermining the EU's position in the global technological race – a race that is ultimately for progress, wealth and geopolitical influence, and whose importance for Europe's future cannot be overestimated.
The case of Munich-based start-up Marvel Fusion highlights many of the EU's technology problems: the world leader in nuclear fusion technology announced in 2023 that it would move most of its research and development to the US due to cumbersome European regulations and lack of funding. And it is just one of many highly innovative companies in the green technology sector leaving Europe for the US and Asia for similar reasons.
For example, when we look at alternative proteins like cultured meat or plant-based eggs, we find that these markets offer a much more favorable regulatory environment. The U.S. Food and Drug Administration has already approved the sale of cultured meat in the United States. Meanwhile, Europe doesn't even have a credible timeline for regulatory approval. In fact, Italy banned cultured meat last November.
The EU needs to increase funding for tech startups and scaleups. | Sean Gallup/Getty Images
This over-regulation and under-funding also puts the EU's AI sector at risk of becoming globally irrelevant. For example, France's Mistral and Germany's Aleph Alpha recently raised $415 million and $500 million, respectively, while California-based OpenAI is in talks to raise $10 billion at a $100 billion valuation. The funding gap becomes even more evident when looking at total private AI investment. According to the Stanford AI Index, private investment in AI in the United States totaled $335.2 billion between 2013 and 2023, followed by China with $103.7 billion and the UK with $22.3 billion, while Germany, France and other EU countries combined invest less than the UK alone.
Moreover, the EU's recently adopted AI law has received a chilly reception from the tech community as it adds further complexity to an already highly regulated market. The main concern is that the new rules will significantly increase compliance costs for domestic AI startups and scaleups, stifling innovation. Many companies are already considering relocating to the UK or US, or divert from innovating in healthcare and other critical sectors that are deemed high-risk under the new regulations.
