Despite revising its digital strategy priorities, the EU remains a slow and unwieldy actor. Its digital regulations will inevitably remain complex, as they are the only way to reconcile the differing approaches of all 27 member states. The EU’s vision of technological sovereignty remains an aspirational concept on paper rather than an achievable reality, Darya Moiseeva writes.
Faced with the painful reality of being left behind in the technological race, the European Union (EU) is revising its digital management strategy, in particular when it comes to developing and regulating artificial intelligence (AI). While the United States and China invest billions of dollars in AI development, from start-ups, semiconductors and infrastructure to civilian and military applications of AI, European politicians are struggling with an internal conflict of digital management, trying to combine value-based regulation with encouraging the AI industry. It is a fundamental contradiction of Europe’s digital development strategy. The EU is operating in the context of an increasing geopolitical and technological competition and ailing trans-Atlantic relations to find a balance between the competitive roles of regulator and innovator, which is like trying to sit on two chairs. To make matters worse, it has declared the striving for strategic autonomy and technological sovereignty as its goal.
Ten years ago, Europe enjoyed the extraterritorial influence of its laws in the sphere of digital management, a phenomenon known as the Brussels effect. It looked like the package of European regulations on the protection of personal data (General Data Protection Regulation or GDPR), digital markets and digital services (DMA and DSA) would bring American IT giants to their knees,as evidenced by the numerous penalties imposed on them. However, the EU has failed to convert its regulatory influence into tangible technological achievements, while the Americans came to see penalties as unavoidable business expenses in the common European market. Moreover, a fragmented digital regulation, which was often applied on a case-by-case basis, put off both designers and investors.
Mario Draghi has pointed to another drawback in the EU’s digital development in his report – a significant lack of funding.
AI development directly depends on investment in research and design, as proved by the close and successful partnership between Microsoft and OpenAI. The EU is lagging far behind the United States in terms of venture capital (VC) investments in AI, investing $11.5 billion in 2024 compared to $95 billion invested in the United States and $17 billion in China. That is why European companies, such as Aleph Alpha and Mistral, which are working on generative AI, need more investments to be able to compete with American players. The lack of funding in Europe often forces local start-ups to look for funding overseas, which creates a vicious circle. As a result, the relevant personnel, companies and technologies are located in the United States rather than in Europe.
The European Commission’s reply to these two challenges was a policy document, Competitiveness Compass, published in January 2025.It sets out measures designed to give a new trajectory to the EU’s digital development, which was actively discussed at the subsequent AI Action Summit. President of the European Commission Ursula von der Leyen announced the allocation of another €8 billion to AI Factories across Europe and the investment of €50 billion to support the development and application of AI, including in purely military technologies.The EU has also clearly formulated its commitment to stimulating private capital growth and inflow. The issue of regulations has been moved to the back burner, as can be seen in the European Commission’s refusal to continue drafting an AI Liability Directive, which would have stipulated extrajudicial civil liability for damages done by AI-powered services.
So far, Europe’s AI industry has relied primarily on public investment, which remains quite limited. The European Commission’s strategic shift aims to create the most favourable conditions for increasing private financing – a crucial step in accelerating the sector’s growth. Expectations are high for greater diversification and networking among small and medium-sized enterprises (SMEs) across Europe, supported by shared standards and open-source technologies. This foundation could bolster the EU’s technological sovereignty, albeit to a modest extent.
In early 2025, the European Commission President also unveiled plans for AI gigafactories (next-generation AI factories), hailing them as a breakthrough in computing infrastructure. The initiative drew parallels to the European Organisation for Nuclear Research (CERN), the world’s leading intergovernmental high-energy physics laboratory whose collaborative format has proven highly effective. The Commission now aims to replicate this strategy through gigafactories planned under the European High Performance Computing Joint Undertaking (EuroHPC), a partnership between the European Commission, EU member states, and private entities.
This highlights a key distinction between European and US approaches to AI development: while the EU merges private innovation with public interest, backed by European – mostly public – funding, the US relies almost entirely on private investment, with the state offering only regulatory incentives (like streamlined land use permits and guaranteed access to cheap energy and water) rather than direct financial support.
At the same time, despite revising its digital strategy priorities, the EU remains a slow and unwieldy actor. Its digital regulations will inevitably remain complex, as they are the only way to reconcile the differing approaches of all 27 member states.
In this context, the EU’s vision of technological sovereignty remains an aspirational concept on paper rather than an achievable reality – in fact, equally unachievable for any member state. European policymakers are harbouring fewer and fewer illusions about these limitations: the bloc’s political structure and digital regulations prevent both the emergence of US-style “homegrown tech giants” (a development opportunity Europe missed half a century ago) and the adoption of China’s model with a state monopoly on stimulating the tech industry. Consequently, the EU can only rely on its own distinctive path, while leveraging its supranational mechanisms designed to enhance its high-tech and AI competitiveness. Yet even if successful, this strategy is unlikely to elevate Europe beyond its current position as a technological underdog.
