The European artificial intelligence (AI) ecosystem has seen unprecedented growth in the past few years. In fact, AI funding in Europe has increased 10x in just a decade, according to our recent report by Roosh in collaboration with Dealroom. Just this year, we’ve seen GenAI funding in Europe surpass any previous year—in just the first six months.
This growth hasn’t happened in a vacuum—it has been largely driven by U.S. investors, the influence of whom is hard to understate. As of mid-2024, American investors have invested 20x more in European Generative AI than any other country. The Magnificent Seven—Apple, Tesla, Alphabet, Amazon, Nvidia, Microsoft, and META—engaged in a record-breaking 15 deals with European AI startups last year and now support many of the most prominent AI companies in Europe. However, it’s not just these tech giants that have a hand in EU AI infrastructure: 40-50% of late-stage funding ($40 million and over) in European AI companies comes from U.S. investors, and over 70% of rounds of $40 million and over had at least one U.S. investor participating.
Intellectually, too, the U.S. is ahead of the pack. Recent research shows that 73% of large language models (LLMs) are being developed in the U.S., and over 70% of cited papers regarding AI have at least one U.S.-based author.
What this level of involvement means for the EU AI ecosystem
Microsoft’s recent $16 million investment in Mistral has revived familiar EU concerns around U.S. investor involvement. On one hand, the benefits for Mistral are evident. A distribution deal, alongside the resources necessary for scaling and growth, allows the company an efficient route into global expansion. There is a chance that with Microsoft’s assistance, Mistral could eventually grow to challenge current U.S. monopolistic technologies. On the other hand, however, the deal increases the involvement of American corporate investors in one of France’s standout technology companies. This has drawn scrutiny from the U.K. and the EU. Representatives of the U.K.'s Competition and Markets Authority (CMA) told Fortune it currently has a live Phase 1 merger investigation into Microsoft’s partnership arrangements with Inflection AI. They are also considering Microsoft’s arrangements with OpenAI, although this has yet to progress to a formal Phase 1 review.
Discussions around legislating AI have seen France, Germany, and Italy advocate for a laxer approach to regulating companies that produce GenAI models—a move that has been seen by some commentators as influenced by large corporations such as Microsoft. This illustrates the potential for private companies to effectively lobby European legislative practices (nothing that hasn’t been seen before in other technology verticals). If European economies hope to survive in, and even compete with, an American AI market, a decision on desired levels of sovereignty will have to be made.
It’s worth noting that Microsoft’s first investment into OpenAI, an American company, was approximately $1 billion dollars. Competition with numbers like these, at scale, will require U.S. investments, and for EU companies to pretend otherwise would be wishful thinking. If European AI companies want to scale globally, they evidently require the material resources, financial backing, and intellectual leadership that U.S.-led investment and American infrastructure provide.
The ‘Brussels effect’ is far from over
The trade-off between European regulatory primacy and the influence of U.S. capital may not be as unevenly weighted as it seems. The U.S. may have so far set the pace, leading in terms of investment and knowledge—but the international success of EU regulatory programs—such as GDPR—speaks for itself. Emerging and rapidly expanding economies such as Brazil and Nigeria adopted aspects of GDPR into their legal frameworks alongside countries such as Canada and South Africa, too. And for U.S. companies to enter these markets—and the EU itself—they have to comply with these regulations.
Lawsuits against Microsoft alleging illegal use of data by OpenAI in training AI models, suggest a tide is turning in the U.S. when it comes to regulating AI, and Europe is very much setting the pace here. U.S. legislators are paying attention to what’s occurring in Europe, and how their markets and consumers respond to restrictions imposed on an emerging technology like AI.
Whilst U.S. investment may be necessary for European AI companies to scale, this doesn’t mean that European legislative interests are at risk. In fact, if anything, we may see U.S. Big Tech companies falling into line with legislation that emulates the tone set by Brussels over the coming year, as more regulatory bodies in the U.S. call for caution about the impact of this paradigm-shifting technology. As regulatory concerns mount, U.S. investors would do well to study high-flying European AI companies, as well as the market conditions they continue to thrive under.
Correction: This article has been updated to correct the status of the U.K.'s Competition and Markets Authority's investigation into Microsoft's arrangements with Inflection AI.
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