Some races are received or misplaced within the first moments after the beginning whistle, so let’s get this out of the best way: as an entire, Europe just isn’t aggressive with the U.S. or China in growing the high-scale, foundational giant language fashions (LLMs) on which the AI financial system relies upon.
The continent’s sole noteworthy LLM, France’s Mistral, is the exception that proves the rule, and nonetheless considerably smaller than these of world market leaders like OpenAI, Google, Meta, Deepseek or Anthropic. The sums being invested into these American and Chinese language fashions make catching up unlikely.
Does this imply that Europe has misplaced its likelihood to learn from the AI revolution on equal phrases with the U.S.?
Not essentially. The worth of AI principally manifests in how corporations use the know-how, says Matthias Tauber, who leads Boston Consulting Group’s operations in Europe, Center East, South America, and Africa. “When it comes to AI adoption, we don’t see a difference between European or U.S. companies. Whether they will be winners, yes or no, will be determined by who drives adoption faster,” he tells Fortune.
Dominic King, EMEA analysis lead at Dublin-based consultancy and IT agency Accenture, agrees: “European companies are well-positioned to add value by building applications on top of general-purpose U.S. models.”
In different phrases, it’s nonetheless all to play for.
Which European firms are forward?
In relation to AI adoption, Europe nonetheless has its work lower out for it. Based on the European Parliament, solely 13.5% of EU firms had been utilizing AI as of final yr. Whereas that’s little question elevated considerably since, it’s a far cry from Europe’s 75% goal. It’s additionally prone to be properly behind the U.S., with McKinsey estimating a 45-70% transatlantic adoption hole in the identical yr.
Zoom in, nevertheless, and also you’ll see a extra nuanced image, with many European corporations at the least maintaining with their world opponents.
“When it comes to AI adoption, we don’t see a difference between European or U.S. companies. Whether they will be winners, yes or no, will be determined by who drives adoption faster.”Matthias Tauber, Head of BCG Europe, Center East, South America and Africa
A lot is determined by the dimensions of the enterprise. Accenture analysis on Europe discovered a transparent relationship between the power of an organisation’s AI capabilities, reminiscent of its expertise and information governance, and its AI deployment. Bigger firms are “typically able to invest more, have stronger change management skills and benefit from larger datasets,” King says.
Which firms are forward additionally is determined by their sector. Alongside the apparent candidates like IT, a lot of Europe’s main industries—like automotive, biopharma, fintech and aerospace—are amongst these the place AI considerably impacts core actions, fairly than simply supporting capabilities. This makes them each ripe to learn from AI deployment, and weak to exterior disruption of the sort already enjoying out in electrical automobiles.
That mix of menace and alternative has made corporations in these sectors extra prone to actively lean into the brand new know-how. “Here we see early adopters boosting productivity with AI, for example, by accelerating drug discovery, conducting more accurate simulations and improving product design,” provides King.
Accenture itself, whereas finest understood as a multinational with European headquarters fairly than as a distinctly European firm, is amongst these early adopters. In 2023, Accenture introduced it might put aside $3 billion to combine AI internally and to turn into consultants on it for its shoppers, per earlier Fortune reporting.
The agency booked $4.1 billion for GenAI work, and $1.8 billion in income, as of its Q3 earnings name in June, with embedded AI, deep industrial information and power effectivity rising as key themes. It’s aiming to construct an 80,000-strong information and AI workforce by 2026, having already hit 75,000.
Bigger firms are “typically able to invest more, have stronger change management skills and benefit from larger datasets.”
Dominic King, EMEA analysis lead, Accenture
Schneider Electrical is one other European firm going massive on AI. The commercial know-how and power administration group generated over €100 million (round $116.9 million) in enterprise worth from embedding AI into its operations, Gwenaelle Avice Huet, its government vp of operations in Europe, tells Fortune. That determine, which truly dates again to as early as 2022, is a results of value financial savings and operational efficiencies it made through its “self-healing” provide chain platform.
The French multinational makes use of AI in its provide chain, monetary advisory and customer support. “Our internal Jo-ChatGPT platform enables employees to securely leverage generative AI, boosting productivity and creativity while maintaining data integrity,” Avice Huet provides. Externally, AI can be utilized in Schneider Electrical’s flagship merchandise, reminiscent of power administration and industrial automation.
The primary method that Schneider Electrical advantages from the AI increase is extra direct, although, resulting from its function as a number one world provider {of electrical} elements utilized in information facilities, alongside others just like the Netherlands’ ASML, a key know-how provider for superior semiconductor producers.
To provide a way of the dimensions of the market they’re supplying, within the EU alone €100 billion in information heart investments are projected by 2030, in line with the European Information Centre Affiliation, though that is prone to be considerably decrease than the equal within the U.S., which McKinsey estimates will alone obtain round 40% of world information heart funding this decade.
A few of this funding is coming from firms that you just wouldn’t usually name tech corporations, with EU companies reminiscent of Lidl’s guardian firm, Schwarz Gruppe, eyeing their very own information facilities, partly from a want to scale back Europe’s dependence on American capabilities.
Not everyone seems to be proving so enthusiastic, nevertheless. As in different nations, there are additionally distinguished sectors of the European financial system that are inclined to lag in AI adoption, reminiscent of utilities and telecommunications—paradoxically, sectors that themselves underpin the rollout of AI. King explains that these battle with fragmentation, entry to capital, and weak AI capabilities resulting from low AI literacy and an absence of concrete use instances with clear return on funding.
A double infrastructure hole
Regardless of some stragglers, the large image is of hovering demand for AI, however even with the huge sums being invested in European information facilities, provide continues to be struggling to maintain up. Consequently, infrastructure dangers changing into a important bottleneck, making AI costlier and slower to make use of. Information heart emptiness charges—a measure of their accessible further capability—are at an all-time low on the continent.
AI adoption can be prone to come up in opposition to one other infrastructure bottleneck, within the power system. Information facilities use substantial electrical energy—Goldman Sachs predicts they might add 40-50% to Europe’s energy demand over ten years.
This causes two issues. First, the extra burden on the grid will apply upward stress on Europe’s excessive power costs, which already weigh on industrial competitiveness. Second, if Europe’s power infrastructure investments can’t sustain with information heart demand, then it dangers constraining AI adoption for European companies.
It’s not simply the dearth of energy per se. Information facilities rely on an uninterrupted power provide, however the product they facilitate creates demand spikes that make outages extra possible. If there’s an excessive amount of volatility, it will probably impede their operations, add prices and disincentivize additional funding.
“If you’re a data center operator, you’re sat in the middle of double uncertainty, with more volatility coming in on the demand side and more volatility on the energy market side,” says Jade Batstone, cofounder and CEO of Zendo, a startup serving to information facilities turn into extra power environment friendly.
The hazard for Europe’s competitiveness is that its financial system might fall comparatively additional behind on each AI and power costs, within the absence of accelerated, simultaneous funding into each units of infrastructure.
It will be a mistake to see AI solely as an issue for the power sector, nevertheless. It will also be a part of the answer. The Worldwide Power Company (IEA) tasks that AI might unlock an extra 175 gigawatts of world power capability just by bettering the effectivity of grids, which is greater than only a marginal effectivity acquire: it’s larger than the whole projected world power demand for information facilities by 2030, and 5 occasions greater than Europe’s 2030 projected energy demand.
Standing agency on going inexperienced
This factors to the one space the place Europe has one thing of a bonus over the U.S.—the intersection between information facilities and renewable energy.
Europe has “a strong legacy” in information facilities, clear know-how and manufacturing, which means its aggressive edge lies in “building the resilient, sustainable infrastructure that powers AI,” argues Avice Huet, pointing to Schneider Electrical’s partnership with Nvidia on AI-native information heart designs.
“While high energy costs may weigh on Europe’s competitiveness today, particularly in energy-intensive industries, smart deployment of AI combined with the continent’s leadership in renewables technologies such as offshore wind could help reduce both emissions and costs in the long-term,” King provides.
Such an consequence is especially interesting for companies which can be dedicated to each AI and decarbonization, with giant tech corporations reminiscent of Google setting the bar with commitments to be absolutely powered by renewable power by 2030. Certainly, BNP Paribas notes that almost all hyperscalers favor renewables even on financial grounds alone, owing to the decrease operational prices from photo voltaic, geothermal and wind.
However absolutely renewable information facilities is probably not so simple to attain, notes Zendo cofounder and COO Drew Barrett: “You’re going to really struggle to do that in grids that haven’t deeply decarbonized already.”
That is the place Europe’s benefit is available in. Whereas nobody has hit the complete decarbonization bar but, renewables did generate 50% of all electrical energy used within the European Union final yr, per the IEA—comfortably the very best of the most important economies. Brussels has additionally set the aim for information facilities to be local weather impartial by 2030, requiring them to report on power consumption, how a lot of that’s renewable, and water utilization.
Whereas some might even see such regulation as an extra barrier to funding, Avice Huet argues that “decarbonization is not a constraint on competitiveness; it is central to Europe’s ambitions for growth and industrial strength.”
This place mirrors the EU’s Clear Industrial Deal, a technique to construct a aggressive area of interest in clear applied sciences, which might prolong to ‘green’ information facilities—particularly because the U.S. seems to fossil fuels to energy its computing wants, following President Trump’s AI motion plan, which was notably silent on renewables.
However whereas European lawmakers’ studied give attention to customers over companies has resulted in world-leading legal guidelines on information safety and sustainability, Tauber says it has nonetheless difficult the non-public sector’s skill to truly compete. Given the complexity and fragmentation of EU laws, which is interpreted in a different way throughout member states and sits on prime of a number of layers of home regulation, Europe ought to decontrol, he says.
There was some progress in simplifying laws. The EU’s AI Continent Motion Plan proposes streamlined allowing for information facilities that meet power and water effectivity requirements, which means inexperienced information facilities are preferentially incentivized. Avice Huet sounds an optimistic observe: “With a continued focus on cutting the red tape, electrification, digitalization, and grid modernisation, Europe can emerge stronger, more resilient, and more competitive on the world stage.”
