European Commission eyes ramping up AI to keep up with US and China

The European Commission is mobilizing €1 billion from existing EU funds to accelerate AI adoption across 10 critical sectors, including healthcare, manufacturing, and defense, aiming to boost competitiveness and establish an "AI first policy." This initiative addresses the EU's significant lag in AI investment and innovation compared to the US and China, with substantially lower venture capital and advanced technology allocations. Concurrently, the Commission confirmed it will not pause the AI Act but will review existing regulations to ease business burdens, signaling a dual focus on promoting AI integration while refining the regulatory framework.

Analysis

The European Commission has urged 10 key sectors to adopt AI tools to boost competitiveness, with €1 billion in funding and the introduction of new AI-powered initiatives. The European Commission has identified 10 sectors that must increase their adoption of artificial intelligence to keep pace with other regions, announcing plans to mobilise €1 billion in existing EU funds to support AI integration across healthcare, manufacturing and defence. With its Apply AI Strategy, the Commission aims to encourage an “AI first policy” for those sectors, so more companies will consider AI tools when tackling problems. European Commissioner for Technological Sovereignty, Security and Democracy Henna Virkkunen said in a press conference Wednesday that companies "should favour EU solutions where they can.” “The businesses mainly use AI tools in their office work – and we now want to go to the industrial sectors and apply it," she added. Concrete measures include setting up AI-powered, advanced screening healthcare centres to enable more accurate diagnoses, as well as supporting the development of AI tools tailored to sectors such as manufacturing, the environment and pharmaceuticals. The €1 billion quota will be drawn from existing EU funding programmes such as Horizon Europe and the Digital Europe Programme, all part of the EU’s long-term budget. “The initiative will address ecosystem bottlenecks and downstream demand by Europe’s industry, enhancing both competitiveness and sovereignty in frontier AI development,” the statement said. The EU previously set a target for three-quarters of firms in the bloc to be using AI by 2030. However, data published by the Commission earlier this year suggests that the 27-member union is behind when it comes to AI innovation and investment compared to other major players in the field, including the US and China. Whereas the EU’s primary funding tool for advanced technologies, including AI, had some €256 million in 2024, the US allocated more than $6 billion (€5.16bn) for the same purpose, data shows. The EU invested close to €7 billion in venture capital for artificial intelligence, compared to €58.5 billion in the US and €12.9 billion in China, according to the report. AI Act to be paused? Commission says no The call comes as the Commission plans to publish, before the end of this year, a package of measures aimed at making companies’ lives easier and helping them reduce obligations such as excessive reporting. It will review all existing legislation to identify what can be removed. The AI Act — EU rules adopted in 2024 that rank AI tools depending on the risk they pose to society — will be part of this. The AI Act is being phased in gradually and will be fully in force in 2027. There have been calls, including last month by Italian Prime Minister Mario Draghi — whose report was the basis for many of this Commission’s plans on competitiveness — to pause the AI Act due “to unknown risks”. His comments add to ongoing concerns from businesses for a “two-year clock-stop” on the rules to allow “both for reasonable implementation by companies, and for further simplification of the new rules.” The Commission in response said it is not considering such a pause. Wednesday’s sectoral strategy comes after the EU executive in July published its overarching AI action plan which aims to improve infrastructure, data access, cloud and skills. Under that plan, so-called gigafactories will be set up, where developers of AI systems, often start-ups, can train their AI models. This applies to companies like the French MistralAI, which warned Europe last year that it lacks the data centres to train AI models that match the current demand. The sectors encompassed in the strategy revealed on Wednesday include healthcare, pharmaceuticals, energy, mobility, manufacturing, construction, agri-food, defence, communications and culture, with others such as finance, tourism, and e-commerce possibly added at a later stage. The European Commission has initiated a significant push to accelerate AI adoption across 10 critical sectors, including healthcare, manufacturing, and defence, by mobilizing €1 billion from existing EU funds. This "AI first policy" aims to boost competitiveness and enhance EU sovereignty in frontier AI development, directly addressing identified ecosystem bottlenecks and industrial demand for AI tools. This strategic move comes as the EU lags considerably in AI innovation and investment compared to global counterparts like the US and China. Data indicates the EU allocated €256 million for advanced tech in 2024, far less than the US's $6 billion, and saw only €7 billion in AI venture capital compared to €58.5 billion in the US and €12.9 billion in China. Concurrently, the Commission affirmed its commitment to the phased implementation of the AI Act, set to be fully in force by 2027, while also planning to review existing legislation to reduce business obligations. This dual approach signals an intent to foster AI integration through financial incentives and infrastructure development, such as gigafactories, without pausing the regulatory framework. The initiative specifically targets sectors where current AI application is limited primarily to office work, seeking to extend it into industrial processes and advanced services like AI-powered healthcare diagnostics, potentially stimulating significant sectoral transformation.

Key Decisions for Investors

• Investors should identify and evaluate EU-based companies within the 10 targeted sectors (e.g., healthcare, manufacturing, defence, energy, mobility, pharmaceuticals) that are well-positioned to benefit from the €1 billion funding and the "AI first policy."
• Monitor the impact of the AI Act's phased implementation and forthcoming legislative reviews, as regulatory clarity and potential business burden reductions could accelerate AI adoption and reduce operational risks for European enterprises.
• Consider investment opportunities in infrastructure providers, including data centers and AI training facilities ("gigafactories"), which are critical components of the EU's strategy to address identified bottlenecks and support domestic AI development.