No US-style AI investment boom to drive EU growth

AI-related investment is unlikely to be a near-term driver of GDP growth in the EU, unlike the US where it contributes significantly. Despite rapid expansion, the AI sector in the EU is still too small and heavily reliant on imports.

• A US-style AI investment bonanza is unlikely in the EU because of planning and energy capacity constraints, though these are also likely to lead to greater diversification of data centre locations. The Nordics and parts of South Europe are attractive alternatives to the traditional Frankfurt, London, Amsterdam, Paris and Dublin cluster.

• We expect the gap between the EU and the US to widen. Several factors inhibit AI investment in the EU – availability of risky capital, length of planning and building permission processes, and the availability of cheap, reliable electricity and cooling.

• Similar trends apply in microchip manufacturing. The EU has managed to land some large investments, and the EU Chips Act aims to mobilise €86bn by 2030. But this still lags the scale of industrial policies in the US and China.