Brussels is pushing to strengthen European capabilities in semiconductors, cloud computing and artificial intelligence as it seeks greater technological sovereignty and less dependence on the United States and China.
For years, Europe has occupied an increasingly uncomfortable position in the digital economy. It has become one of the world’s most influential regulatory powers, imposing rules on the technology sector while relying heavily on companies and infrastructure based elsewhere.
Over the past decade, the EU has developed an extensive regulatory framework, including the General Data Protection Regulation, the Digital Markets Act, the Digital Services Act and the AI Act. But while Brussels was building its rulebook, US and Chinese companies were investing heavily in chips, data centers, cloud platforms and artificial intelligence.
The rapid development of AI has made that imbalance harder to ignore. Digital infrastructure is no longer viewed simply as a matter of commercial competition. Cloud services, semiconductors, data centers, networks and computing capacity are increasingly regarded as strategic assets.
One measure illustrates the scale of Europe’s dependence: 92% of Western data is stored on infrastructure owned by US companies, according to an Oliver Wyman analysis of European digital sovereignty.
EU institutions have also estimated that more than 80% of the bloc’s digital products, services, infrastructure and intellectual property come from outside the EU. The figure was cited by the European Parliament in a January 2026 resolution on technological sovereignty.
For Brussels, the issue is therefore no longer simply whether European businesses use foreign technology. It is whether Europe has enough domestic capacity to avoid becoming vulnerable to decisions made by companies or governments outside the bloc.
Brussels changes course
The European Commission does not appear to be seeking a complete technological break with the United States or China. Instead, its emerging strategy is based on building sufficient European alternatives to give governments and businesses greater freedom of choice.
Commission President Ursula von der Leyen outlined that approach in June when she presented the European Technology Sovereignty Package.
The package includes proposals for a new Chips Act, known as Chips Act 2.0, and the Cloud and AI Development Act, or CADA. It also includes an open-source strategy and a roadmap for the digitalisation of Europe’s energy sector.
The measures remain legislative proposals and must still go through the EU’s policymaking process. Nevertheless, they provide a clear indication of how Brussels intends to approach technological sovereignty.
The shift is particularly visible in cloud computing.
Amazon Web Services, Microsoft Azure and Google Cloud account for roughly 70% of Europe’s cloud infrastructure market, while European providers control about 15%, according to the figures cited in the proposal.
European cloud companies held around 29% of the market in 2017. Their share subsequently fell to about 15% and has remained largely stagnant.
The dominance of the US hyperscalers has raised concerns about vendor lock-in. Companies that build their operations around a particular provider can become increasingly dependent on its storage, databases, development tools, cybersecurity systems and AI services, making it expensive and technically difficult to switch.
The EU has already attempted to address the problem through regulation. The Data Act, which began applying in September 2025, includes provisions intended to make it easier for customers to move between data-processing providers, including cloud and edge-computing services.
Brussels has also begun examining whether major cloud companies should fall under the Digital Markets Act’s rules for so-called gatekeepers.
In June 2026, the European Commission informed Amazon and Microsoft of its preliminary view that AWS and Azure should receive that designation. The process has not yet been finalised, but it reflects the EU’s growing focus on cloud infrastructure as a strategic sector rather than simply another technology market.
CADA and the idea of digital sovereignty
Artificial intelligence has made the cloud issue even more important.
Developing and operating advanced AI models requires enormous computing capacity, specialised chips, data centers, storage systems, high-speed networks and large amounts of electricity. As AI expands, data centers are increasingly becoming the industrial infrastructure of the digital economy.
CADA is designed to address that challenge. The proposal aims to at least triple the EU’s data-center capacity over the next five to seven years, accelerate permits for new facilities and improve access to energy, land, water and financing.
It would also establish a common European framework for evaluating the sovereignty of cloud and AI services, potentially allowing public authorities to take those criteria into account when awarding contracts.
One of the most significant elements of the proposal is its broader definition of sovereignty.
Under the proposed framework, the first level would require data to be processed and stored on infrastructure located within the EU. Higher levels would add requirements concerning independence from non-EU countries, transparency of the software supply chain and European ownership and control.
The highest level would require extensive transparency and control over the software supply chain, together with protection against interference by third countries.
The distinction is important because physically locating a server in Europe does not necessarily mean that the technology or company operating it is under European control.
That concern has been raised by Sebastián Muriel, Telefónica’s chief digital officer, who has argued that simply storing data on European soil is not enough to guarantee sovereignty.
The US Cloud Act is one reason for the concern. Depending on the circumstances, US authorities can seek information from companies subject to US jurisdiction even when the relevant data are stored outside the United States.
This has led to growing discussion in Europe about what critics have described as “rented sovereignty” — the idea that data may physically remain in Europe while the infrastructure and ultimate corporate control remain elsewhere.
The emerging EU approach does not necessarily mean abandoning US technology. Instead, the objective is to ensure that dependence on foreign providers does not become an unavoidable strategic vulnerability.
Europe targets the semiconductor gap
The same logic is behind Chips Act 2.0.
Europe currently accounts for just under 10% of global semiconductor production. The new proposal seeks to strengthen European manufacturing capabilities, develop advanced technologies, improve supply-chain resilience and stimulate demand for chips produced within Europe.
Brussels is not attempting to manufacture every type of semiconductor domestically. Instead, the aim is to preserve industrial capabilities considered strategically important and reduce the risk of supply disruptions.
The pandemic, US-China trade tensions and restrictions on certain technology exports have demonstrated how quickly global supply chains can become vulnerable.
The EU is also placing greater emphasis on open-source software. Brussels wants to strengthen open alternatives and encourage their adoption by public administrations, reducing reliance on proprietary systems controlled by foreign companies.
But technological sovereignty also depends on energy.
AI and cloud infrastructure require enormous amounts of electricity, meaning that Europe’s ability to expand its digital infrastructure is closely connected to the availability and cost of energy. The Commission’s energy roadmap therefore seeks to coordinate the expansion of data centers with electricity supply and decarbonisation targets.
A shortage of skilled workers
Infrastructure and investment are not the only challenges.
Around 60% of EU companies report difficulties recruiting qualified workers in areas including AI, cybersecurity and clean technologies, according to the European Parliament.
That shortage represents another obstacle to Europe’s technological ambitions. Data centers, capital and companies alone cannot create a competitive digital ecosystem without engineers, AI specialists and cybersecurity professionals.
The Commission’s executive vice-president responsible for technological sovereignty, security and democracy has described the challenge as part of a wider global race over the future of AI.
The shift in Brussels’ approach is increasingly clear. The EU is no longer concentrating solely on ensuring that major technology companies comply with European regulations. It also wants European companies capable of competing with them.
Investment remains a major weakness
Europe’s ambitions face a significant funding gap.
The EU spent €381.4 billion on research and development in 2024, equivalent to 2.22% of GDP, according to the European Commission’s State of the Digital Decade 2025 report. However, the Commission estimates that Europe’s overall R&D effort remains around 34% below the combined level of the US and China.
The gap is reflected in Europe’s corporate landscape. Only four of the world’s 50 largest technology companies are European, according to figures highlighted by economist Mario Draghi in his assessment of European competitiveness.
The picture is even more pronounced among the world’s largest technology companies. PwC’s Global Top 100 Companies 2026 report found that no European company ranked among the world’s 10 largest technology firms by market capitalisation.
Europe has research and technology companies, but many struggle to achieve the scale of their US and Chinese competitors. Fragmented capital markets and the EU’s 27 national jurisdictions can make it more difficult for companies to expand rapidly across the bloc.
Draghi has also pointed to the movement of European startups abroad. Nearly 30% of European unicorns created in Europe have subsequently moved their headquarters outside the region.
The challenge for Brussels is therefore not simply to develop new technologies. It is to create the conditions for European companies to retain their intellectual property, attract financing and grow into globally competitive businesses.
Public procurement is becoming part of that strategy.
In April, the European Commission awarded contracts worth up to €180 million for sovereign cloud services for EU institutions. While such spending is small compared with the investments of US hyperscalers, it could provide European technology companies with an important anchor customer.
The AI gap remains substantial
Artificial intelligence highlights the scale of the challenge perhaps more clearly than any other sector.
In July 2026, the highest-ranked European AI model was 89th in Artificial Analysis’s rankings. All models above it came from either the United States or China.
The figures underline the gap between Europe’s ambition to develop its own AI industry and its current position in the global market.
The problem extends beyond individual AI models. Europe has struggled to turn its research strengths into companies capable of achieving global scale.
That was one of the central conclusions of Draghi’s assessment of European competitiveness. A year after the report, he warned that failing to act would threaten both Europe’s competitiveness and its sovereignty.
For Draghi, the fundamental issue is scale.
Europe has technology companies and research institutions, but its fragmented markets and limited access to large pools of growth capital make it harder for successful startups to expand to the level of their US counterparts.
The EU is now attempting to address that structural weakness through a combination of regulation, investment, public procurement and industrial policy.
From regulation to technological capacity
Europe’s emerging technology strategy represents a significant change in emphasis.
For years, Brussels’ principal response to the power of Silicon Valley was regulation. The EU sought to establish rules governing privacy, competition, digital platforms and artificial intelligence.
That approach remains central to European policy. But regulation alone cannot create semiconductor factories, cloud infrastructure, AI models or the networks needed to operate them.
The new strategy is therefore based on a broader idea of technological sovereignty: Europe should remain open to foreign technology while ensuring that it has enough domestic capacity to make meaningful choices.
That also means investing in the infrastructure behind the digital economy — from chips and data centers to electricity grids, mobile networks and skilled workers.
A GSMA Intelligence study published in May 2026 estimated that Europe would need €475 billion in mobile-network investment by 2035 to complete its 5G rollout and strengthen its digital infrastructure. Current expectations suggest European operators will mobilise around €270 billion, leaving a potential €205 billion shortfall.
The numbers highlight a broader problem. AI models and data centers cannot operate in isolation. They depend on the networks, electricity and semiconductor supply chains that underpin the wider digital economy.
Europe’s challenge is therefore becoming increasingly clear: technological sovereignty cannot be achieved through legislation alone. It requires investment, infrastructure, skilled workers and companies capable of operating at global scale.
Brussels is now trying to build all of those pieces at once. Whether Europe can close the gap with the US and China will depend not only on the policies it adopts, but on its ability to turn those policies into technological capacity.
Be First to Comment