Europe is investing in artificial intelligence at an accelerating pace, yet much of its capital continues to support technology developed overseas. Euro area households hold approximately €440 billion in American technology companies, highlighting the challenge of financing innovation closer to home.

The stakes extend beyond the technology industry. With an ageing population, rising investment needs and pressure on productivity, AI could become an important driver of Europe's future economic growth.

Europe’s Growing AI Investment

European businesses are rapidly adopting artificial intelligence. Companies in the euro area are expected to allocate approximately 10% of their total investment to AI in 2026. AI-related borrowing also accounted for an estimated quarter of corporate credit growth during the first quarter.

Workplace adoption is accelerating. More than half of euro area employees now use AI professionally, twice the proportion recorded two years earlier.

However, the investment gap with the United States remains substantial. American digital investment has grown twice as quickly over the past two years, while US employees spend two to three times as much of their working week using AI.

Why Productivity Matters

Europe's workforce is expected to shrink by more than one million people annually over the next 25 years. This demographic shift will increase pressure on public finances and economic growth.

AI could help businesses maintain output despite a declining working-age population.

ECB President Christine Lagarde explained that rapid AI adoption could increase Europe's productivity level by as much as 4% over a decade. She argued that stronger productivity would help finance essential investments while supporting economic resilience.

The Problem With Foreign Dependence

Europe currently relies heavily on foreign AI technology. In 2025, American companies developed 59 notable AI models, compared with 35 in China. France and the United Kingdom produced just one each.

The United States also hosts approximately 75% of global AI computing capacity, while Europe's share stands at only 5%.

This dependence raises concerns about data protection and access to essential technology. Almost half of European companies that considered AI but decided against adopting it identified data protection as a major obstacle.

A €600 Billion Infrastructure Gap

Developing European computing capacity will require enormous investment.

Europe's data centre capacity shortfall is projected to increase more than sixfold within a decade. Closing that gap could cost up to €600 billion, including computing equipment.

New European AI gigafactories represent an initial response, but they would meet only a fraction of projected demand.

Financing innovative companies presents another challenge. Unlike conventional businesses, AI developers often require substantial investment over several years before generating profits. Traditional bank lending alone cannot easily support that model.

Turning Savings Into Innovation

European households save approximately €1.4 trillion annually, creating a substantial potential source of investment. However, much of that capital flows abroad rather than supporting domestic technological development.

Lagarde highlighted the importance of stronger European capital markets, domestic AI models and continued innovation in strategic industries, including

Europe's challenge is connecting its financial resources with its technological ambitions. Expanding computing infrastructure, encouraging innovation and accelerating AI adoption could help the continent capture more of the economic benefits generated by this rapidly developing technology.