Europe finds itself in the crosshairs of an unfolding global AI arms race, with the United States and China rapidly accelerating their efforts in AI-powered automation, military tech and digital infrastructure. The race is not just about national pride – it’s about staying in the game.
If you want to know why European businesses must act, keep reading.
A Tightening Global Race
According to the European Parliamentary Research Service, China, the US and Russia are aggressively investing in AI, particularly for defence, intelligence and cyber operations. EU
Europe is scrambling to catch up: initiatives like PESCO and the European Defence Fund now back AI-powered military systems, while NATO lines up civilian and defence industry coordination.
At the political level, summits such as the 2025 Paris AI Action Summit signalled Europe’s intention to race – but also revealed internal contradictions: calls to reduce red tape were also matched by concerns over stifling innovation. As always, Europe seems to struggle to find a common goal for the entire EU. wikipedia
Europe Is Falling Behind… In Places
Despite ambition, momentum is uneven:
Expert voices warn Europe is fragmented and behind in AI strategy, especially compared to the US and China.
Executives from top European firms signed a letter urging clarity and speed in policymaking due to concern over falling behind.
A recent EU strategy assessment, “Europe’s AI Imperative”, called this a make-or-break moment, poised between US-led VC dynamism and China’s top-down execution. arxiv
Investment - But Conditional
Europe has mobilised new funds – but the pressure is on:
The EU committed €50 billion as part of a broader €200 billion AI investment package during the 2025 Paris summit. wikipedia wikipedia
France’s Emmanuel Macron announced private investment pledges of around €109 billion. carnegieendowment
Yet, there’s friction. Some view the EU’s regulations as inhibiting innovation, arguing that bureaucratic hurdles risk stalling private capital. carnegieendowment
Regulation vs. Innovation: Walking a Fine Line
Europe’s AI Act, in force from August 2024, is rightly focused on safer, human-centred AI – but it risks slowing down momentum in high-value sectors like military and strategic telecoms. wikipedia
Meanwhile, global calls for shared AI governance are rising, with proposals such as limiting autonomous weapons and having the EU take the lead in international norm‑setting. carnegieendowment
Europe must balance safeguarding users and citizens while ensuring its firms remain competitive in core AI domains.
What This Means for Your Business
Whether you’re a startup or enterprise, these trends should ring alarm bells:
AI is now a strategic asset – don’t delay. Governments are incentivising firms to embrace AI, especially in critical industries.
Funding is tied to vision. Expect financial support to favour projects showing commercial viability, interoperability and regulatory alignment.
Start with accountability. Systems today require explainability, certification and strong traceability, especially if risky or high-stakes.
Dual-use tech is coming harder. Defence-related AI – like surveillance, UAVs or decision aids – will require compliance with both the AI Act and defence rules.
Talent and partnerships matter. You’ll need engineers who grasp AI and boards that understand regulation, encryption and data sovereignty.
Act Now - or Risk Being Left Behind
With rivals treating AI as critical infrastructure and Europe’s ambition clear, companies that hesitate risk the gap widening. Here’s what to do immediately:
Audit your AI usage: rationalise, document and prioritise traceability.
Connect with national AI arms race initiatives via EDRP, PESCO or AI Champions.
Upskill teams in areas like risk assessment, explainability and cyber‑AI.
Seek partnerships with research centres or trusted vendors in Europe to avoid vendor lockdown.
Engage regulators early: explore sandbox environments for high-risk applications.
Final Thought
The global AI arms race is no idle metaphor – it’s a reality changing how nations and companies compete. For Europe, this is both an opportunity and a deadline. Your firm’s response in the next 6-12 months could define whether you’re a leader – or a follower.
Victor A. Lausas
Chief Executive Officer
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