Europe in the Intelligent Age 2025

Value chain priorities Europe’s AI challenge is daunting. It holds less than 15% global market shares across all four segments of the GenAI value chain,82 with less than 5% in cloud infrastructure (Figure 9). Making up ground will depend on its ability to spur the creation of AI technologies across the value chain including: –Infrastructure and supercomputing. Europe lags in computing power. It has only half the supercomputing capacity in flop/s,83 which is increasingly necessary in basic and applied research. Establishing sufficient computing power, at a sustainable operating cost, is essential for maintaining its competitiveness in AI services. –Foundation models and AI applications. A few European specialized language models and AI applications are increasingly competitive. Europe is home to several emerging AI unicorns, and leading global software companies are incorporating AI into their products. Yet companies in both parts of the AI value chain remain underfunded compared to their US peers. To maintain relevance and even expand those strengths, Europe should consider prioritizing actions to create a more attractive environment for global investors, building on ideas postulated by Draghi.84 –AI services. Europe already has a strong presence in this part of the value chain, as home to major players focused on integrating AI into various business processes and industries. By focusing on specialized offerings for sectors where Europe has existing industrial strengths, such as automotives, defence and manufacturing, European service providers could accelerate adoption and drive demand. Europe’s position in the generative AI value chain FIGURE 9 Semiconductor raw materials, equipment, design and manufacture Cloud infrastructure and supercomputer Foundation models Al applications Al services Covered in the semiconductor section Covered in the semiconductor section Infrastructure offering computing power and data hosting, including basic software layer Europe cloud infrastructure leader has <$1 billion in revenue as opposed to ~$90 billion for the US market leader Design and training of foundation models ~$6 billion valuation for European market leader vs ~$80 billion for US market leader – European players increasing its global market share Al-based software using Al to perform specific tasks across various industries ~12% of global VC and PE funding for software-as-a-service² Al companies raised by European companies, with European players increasing global market share Services to support with design and deployment of Al use cases ~ $80 billion total revenue for Europe market leaders vs ~$90 billion for similar US companies, with European players increasing global market share Key value chain steps Description Europe’s competitiveness Leading Europe’s starting point Lagging Strategic focus area Source: The Future of European Competitiveness,85 DigitalEurope: The EU’s critical tech gap,86 McKinsey Technology Trends Outlook 2024,87 expert interviews Europe in the Intelligent Age: From Ideas to Action 26