The EU invests in artificial intelligence only 4% of what the US allocates

The lack of cutting-edge technology companies in the EU promises to become a thorn in the side of Ursula von der Leyen’s future plan to boost the bloc’s competitiveness and not fall behind the muscle exhibited by the United States or China. The first for leading and the second for not losing track, they top the rankings of technology companies in the world. If the nickname Old Continent suggests something else, it is the maturity of its “innovative” companies and the limitations of their advances. As the EU turns the house upside down to become a technological powerhouse, it must face a harsh truth: invests only 4% in artificial intelligence of what Washington allocates to this technology.

The efforts allocated by the community bloc to advanced technologies, such as artificial intelligence or cloud computing, are far from approaching those of the United States. The main instrument available to the EU, the European Innovation Council It had a budget of 256 million euros in 2024, while the US allocated more than 6,000 million dollars for this purpose, between 4,100 million from the Defense Advanced Research Projects Agency and 2,000 million dollars from other related agencies.

The situation is repeated when looking at venture capital investment. In 2023, they will invest around $8 billion in venture capital in artificial intelligence in the EU, compared to $68 billion in the US and $15 billion in China. The few companies that are creating generative artificial intelligence models in Europe, like Aleph Alpha and Mistralthey need large investments to not lose the race with American firms. However, European markets do not cover this need, which pushes European firms to seek financing outside.

It is no coincidence that one of the calls made by the former Italian Prime Minister, Mario Draghi, in his report on the bloc’s competitiveness, was that technology is one of the pillars, as well as weaknesses, of the future of the EU. He also warned that lack of coordination at community level affects the innovation ecosystem as a whole.

That is why the former president of the ECB proposed doubling the endowment of the community program aimed at research and development, Horizon Europe, to 200 billion euros. His recipe also included focusing on more disruptive innovations, such as artificial intelligence or semiconductors. For the first of the technologies, he proposed the creation of a luck of artificial intelligence factories that would allow training this type of models and, at the same time, increase the resources allocated to this field. To reduce dependencies on the supply of microchips, he advocated spending hundreds of billions and argued that it would be insurance for the community’s future.

The incipient and avant-garde nature of artificial intelligence means that Europe still has room for action to gain a leadership position. Draghi’s report points out that the EU has a relatively strong position in autonomous robots, taking up 22% of global activity, and in artificial intelligence services, with 17% of activity.

However, growth and the ability to attract financing are seen as the main obstacle. And both possibilities open up in the US market. As evidence, there is no EU company with a market capitalization greater than 100,000 million euros that has been created from scratch in the last fifty years. In the North American market, on the other hand, six companies have been created in this period with a valuation of more than 1 billion euros.

The excessive regulation and administrative barriers of the EU are articulated as obstacles for technology companies to decide to settle or simply stay in Europe. In fact, if between 2008 and 2021, 147 unicorns were founded in Europe, that is, companies whose valuation exceeds 1 billion dollars, 40 moved their headquarters abroad, the bulk of them to the United States.

Another reason behind these business decisions is the difficulty in accessing risk capital. The gap with the US to access financing during the growth phase of innovative companies is abysmal. In fact, the data show that if firms established in the North American market capture the 52% of financing from venture capital fundsthe figure is reduced to 5% in the case of those settled on community land, while China keeps 40%.