The investment in AI startups across Europe is increasing as the European Commission recently announced strategies aimed at strengthening its position to be known as an ‘AI continent’. However, the ongoing disruptions in global trade have the potential to hinder this advancement.
European AI investmen
Venture capital funding increased by 55 percent in the first quarter of this year compared to the corresponding period last year, as revealed by new data from Dealroom analyzed by Balderton Capital and exclusively shared with Euronews Next.
The figures indicated that AI firms had secured $3.4 billion (approximately €3 billion), an increase from $2.2 billion (around €1.9 billion) in the first quarter of 2024. Additionally, it was noted that European technology stocks, apart from those related to AI, have dropped by 10 percent.
Nevertheless, the information provided does not account for the impact of tariffs implemented by former US President Donald Trump, which included a 125 percent duty on Chinese imports.
He imposed a 20 percent tariff rate on dutiable exports to the U.S., which was later temporarily reduced to 10 percent.
During the weekend, Trump stated that electronic devices including smartphones and computers would not be subject to the US tariffs.
Although the news boosted European tech stocks early Monday, uncertainty remains due to President Trump’s announcement on Sunday that tariffs will be imposed on imported semiconductors later this week; these components are fundamental to AI development.
Don’t discount European AI.
The unpredictable trading climate consistently leads investors to become more cautious with risks, according to Daria Gneusheva, who works as an investor at the German venture capital firm Project A.
numerous European businesses depend on parts such as GPUs and semiconductors sourced from Asia, they can expect increased prices and interruptions in their supply of hardware,” she explained to Euronews Next, further noting that accessing US markets will likely become both more difficult and less appealing.
She noted that the trade war is also serving as a significant incentive for European businesses and authorities to continue their investments in domestic production and research and development.
Recently imposed tariffs between the US and China have encouraged businesses to explore alternate markets, with Europe becoming a key option, she noted additionally.
“I wouldn’t rush yet to conclude that recent tariff development will make it better or worse for Europe, it can go both ways and it’s up to Europe to make an opportunity out of it”.
Starting new AI initiatives has turned into a geopolitical competition, with countries claiming it’s crucial for their national safety.
The U.S. and China are forging well ahead of Europe in developing fundamental AI models.
based on a recent report from Stanford University.
Balderton pointed out that investments in European AI businesses primarily benefited companies focusing on health, AI media, cybersecurity, and robotics sectors.
The data indicated an increased interest in Europe’s artificial intelligence solutions, with $52 million (€45 million) invested in emerging startups focusing on these technologies. This includes companies like Lovable from Stockholm and Paid AI based in London.
The AI Action Plan
The European Union’s technology commissioner, Henna Virkkunen, was in focus last week.
The announced AI Continental Action Plan focuses on infrastructure, data accessibility, cloud services, skill development, and process simplification. Its aim is to revolutionize Europe’s conventional sectors.
“It is crucial ‘to develop capabilities in key areas’ to guarantee that the bloc does not rely on other regions,” she stated.
We’ve recognized AI as one of the areas where we must develop our capabilities, similar to quantum technology and chip manufacturing. These are crucial technologies for tomorrow.
This year, we’ve seen the emergence of two additional AI unicorns—companies valued at $1 billion (€1 billion) before going public. These newcomers include Sweden’s Neko Health and Ireland’s Tines, increasing the total count of European AI unicorns to 76.
How were European countries affected?
Even though the UK has been left out of the EU’s initiatives for AI development, British startups and scale-ups have attracted the majority of AI investments in Europe. So far this year, these entities have garnered approximately $4.2 billion (€3.6 billion), with about $1.6 billion (€1.4 billion) going specifically to AI firms.
In Germany, AI investments rose by 74 percent during this year’s first quarter, amounting to $404 million (€355 million) when compared to the same period last year.
Nevertheless, France, where the government has advocated for investments in artificial intelligence and hosts firms like Mistral AI, experienced an approximately 18 percent decline in the first quarter of this year compared to the previous one.
However, Balderton discovered that French Q1 investments experienced an overall decline of 26 percent, with AI investments performing comparatively better than French technology as a whole.
The French government has been proactive in advancing the nation’s artificial intelligence sector and recently organized the Paris AI Action Summit. Prior to the summit, President Emmanuel Macron disclosed plans for an investment of €109 billion in AI over the coming years.
“France’s version of this would be similar to what the United States unveiled with Stargate,” Macron stated, referring to the U.S. initiative aimed at investing $500 billion (€438 billion) in developing new AI infrastructure within the upcoming four-year period.
“The drive for artificial intelligence in Europe continues to intensify. The AI Action Summit held in Paris has established ambitious goals for actions needed across the continent, which is commendable as we observe European start-ups and scale-ups stepping up to meet these challenges,” stated James Wise, a partner at Balderton Capital.
In areas like healthcare, cybersecurity, and automation, European AI firms are developing much-needed solutions. The rapid flow of investment indicates that investors are enthusiastic about the region’s tech prospects.