The EU invests in artificial intelligence only 4% of what the U.S. spends on it

The EU's efforts in advanced technologies, such as artificial intelligence and cloud computing, are far from matching those of the US. The main instrument available to the EU, the European Innovation Council, had a budget of 256 million euros in 2024, while the US allocated more than 6 billion dollars for this purpose, including 4.1 billion from the Defense Advanced Research Projects Agency and 2 billion dollars from other related agencies.

The situation is repeated when looking at venture capital investment. In 2023, they invested about $8 billion in venture capital in artificial intelligence in the EU, compared to $68 billion in the U.S. and $15 billion in China. The few companies that are creating generative AI models in Europe, such as Aleph Alpha and Mistral, need large investments to avoid losing the race to U.S. firms. However, European markets do not meet this need, pushing European firms to look outside for funding.

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

That is why the former president of the ECB proposed doubling the budget of the EU's research and development program, 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 these technologies, he proposed the creation of artificial intelligence factories to train this type of models and, at the same time, increase the resources allocated to this field. To reduce dependence on the supply of microchips, he advocated spending hundreds of billions and argued that it would be an insurance for the future of the community.

The incipient and cutting-edge nature of artificial intelligence means that Europe still has room for manoeuvre to take a leading position. Draghi's report notes that the EU has a relatively strong position in autonomous robots, accounting for 22% of global activity, and in artificial intelligence services, with 17% of activity.

However, growth and the ability to raise finance are articulated as the main stumbling block. And both possibilities open up in the U.S. market. As evidence, there is no EU company with a market capitalization of more than 100 billion euros that has been created from scratch in the last fifty years. In the US market, by contrast, six companies have been created in this period with a valuation in excess of 1 trillion euros.

Excessive regulation and administrative barriers in the EU are obstacles to technology companies deciding to settle or simply stay in Europe. In fact, if between 2008 and 2021 147 unicorns were founded in Europe, i.e. 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 venture capital. The gap with the U.S. in accessing financing during the growth phase of innovative companies is abysmal. In fact, the data show that while firms based in the North American market attract 52% of the financing from venture capital funds, the figure is reduced to 5% in the case of those based in the EU, while China accounts for 40%.