Europe's at risk of losing the global tech race - POLITICO Europe

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While these European digital champions have some of the highest GDP per capita globally, they are home to just 14 percent of the total EU population and 18 percent of its GDP. What they do illustrate, however, is that the foundations for a European Tech Powerhouse are already here — just not at scale.

And while this is reason for optimism, we shouldn’t ignore the many factors that seem to be eroding the EU’s position in the global tech race. This competition is ultimately a race for progress, wealth and geostrategic influence, and its importance for Europe’s future cannot be overvalued.

The case of Munich-based start-up Marvel Fusion lays bare many of the EU’s tech problems: A global leader in fusion technology, in 2023, the company announced it would move the bulk of its R&D to the U.S. due to burdensome regulation and lack of funding in Europe. And it’s just one in many highly innovative companies in the green tech sector that are leaving Europe for the U.S. and Asia due to similar reasons.

For example, taking a look at alternative proteins like lab-grown meat or plant-based eggs, we can see these markets provide a much more favorable regulatory environment, with the U.S. Food and Drug Administration already clearing lab-grown meat for sale in the U.S. Meanwhile, in Europe, we don’t even have a reliable timeline for regulatory approval — in fact, Italy banned lab-grown meat in November last year.

The EU needs to boost funding for tech start-ups and scale-ups. | Sean Gallup/Getty Images

Such overregulation and lack of funding puts the EU’s AI sector at risk of global insignificance too. For instance, while France’s Mistral and Germany’s Aleph Alpha recently raised $415 million and $500 million, respectively, California-based OpenAI is in talks to raise $10 billion at a $100 billion valuation. The funding gap becomes even more obvious when looking at total private AI investments: According to the Stanford AI Index, during the period from 2013 to 2023, private investments in AI in the U.S. totaled $335.2 billion, followed by $103.7 billion in China, then $22.3 billion in the U.K., while Germany, France and the rest of the EU combined invested less than the U.K. alone.

Furthermore, the bloc’s recently adopted AI Act received a chilly reception from its tech community, as it adds an additional layer of complexity to an already heavily regulated market. The main concern is that the new rules will stifle innovation by significantly increasing the compliance costs for home-grown AI start-ups and scale-ups. Many of them are already considering moving to the U.K. or the U.S., or pivoting away from innovating in healthcare and other critical areas deemed high-risk by the new regulation.

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