Europe sounds the AI alarm: At real risk of falling behind the US and China

The European Commission warns that Europe still lags in artificial intelligence, advanced chips, cloud infrastructure, and cybersecurity. That’s the message from the new State of the Digital Decade 2026 report, published on June 17. While the EU is making progress on connectivity and business digitalization, Brussels concludes that development of critical digital tech is moving too slowly to compete with the United States and China.

According to the Commission, the foundations for digital transformation are in place, but investment, scale, and cross-country coordination are lacking. As a result, Europe risks staying dependent on foreign companies and infrastructure in strategic technologies.

The warning lands at a pivotal moment. The global race for AI leadership is accelerating fast. Big U.S. tech firms are pouring hundreds of billions into new AI data centers and chip capacity, while China is rapidly pushing technological self-sufficiency through national investment programs. Brussels says Europe risks being squeezed between these two power blocs.

The report highlights several structural weaknesses in Europe’s digital economy. Most notably, the EU is falling short of its 2030 goals for AI capacity, advanced computing, cloud infrastructure, cybersecurity, and digital skills.

That’s a problem because these technologies underpin the next phase of economic growth. Modern AI models demand vast numbers of specialized chips, powerful data centers, and access to massive datasets. The infrastructure behind generative AI is becoming a core driver of competitiveness.

On nearly all these fronts, U.S. and Chinese firms dominate.

The largest AI models come from the likes of OpenAI, Google, Anthropic, Meta, and xAI. Nvidia rules the AI chip market. And cloud infrastructure is largely controlled by U.S. providers such as Amazon Web Services, Microsoft Azure, and Google Cloud.

Europe has strong research institutions and deep technical expertise, but struggles to commercialize innovation at scale. Many European startups are acquired early or relocate to markets with deeper capital pools.

The Commission warns that this lack of scale is one of the biggest risks to the EU’s future competitiveness.

A second concern is financing the digital transition.

The Commission notes that the Recovery and Resilience Facility (RRF), the EU’s major COVID recovery fund, is being wound down. In recent years, it has funneled billions into digitalization, innovation, and infrastructure.

The loss of this funding could trigger what Brussels calls an “investment discontinuity.” In plain terms: projects currently supported risk stalling if fresh EU resources don’t materialize.

The Commission is urging member states to update their national Digital Decade roadmaps by the end of 2026. It also wants tighter alignment with the next Multiannual Financial Framework and the future European Competitiveness Fund.

The message is clear: substantial public investment will again be needed in the coming years to keep Europe digitally competitive.

The report also carries a strategic signal for the Netherlands.

The country is among the EU’s best positioned to benefit from new AI and digital infrastructure investments—thanks to its strong chip ecosystem and role as a digital hub within Europe.

The standout factor is ASML. The Veldhoven-based company supplies lithography machines essential for producing advanced semiconductors. Without ASML’s technology, manufacturers like TSMC, Samsung, and Intel can’t produce modern AI chips.

That gives the Netherlands an indirect but pivotal role across the global AI industry.

The country also boasts one of Europe’s most advanced digital infrastructures. The Amsterdam Internet Exchange (AMS-IX) is among the world’s largest internet hubs, and the Netherlands hosts multiple hyperscale data centers.

This combination of chip leadership, network capacity, and data center infrastructure makes the Netherlands a prime candidate for future European AI projects.

If Brussels unlocks extra funding for AI factories, supercomputers, cloud platforms or European data centers, the Netherlands could become a prime destination for those investments.

Europe’s lag has multiple causes.

Unlike the U.S., Europe lacks a deep bench of tech giants worth hundreds of billions of euros. American companies can invest far more aggressively in new technologies.

The biggest U.S. tech firms alone pour hundreds of billions of dollars a year into AI-related infrastructure. European companies typically have far less financial firepower.

The European market is also fragmented. Companies scaling across the EU still face a patchwork of national rules, permitting processes and market conditions.

The European Commission is trying to fix this with initiatives like the Digital Decade strategy, the AI Act and new investment programs for digital infrastructure. But the latest report shows these steps are, for now, not enough to quickly close the gap with the U.S. and China.

Brussels’ message goes beyond tech policy.

AI is increasingly viewed as foundational economic infrastructure—on par with electricity, railways or the internet in earlier industrial eras. Countries with the chips, compute, data infrastructure and technical talent will gain a decisive economic edge.

According to the Commission, Europe faces a strategic choice. Without additional investment, the EU risks relying on foreign AI models, cloud platforms and digital infrastructure. With targeted funding, Europe can still build strength in key parts of the AI stack—semiconductors, industrial AI, advanced manufacturing and digital infrastructure.

The next few years are critical. As the global AI race accelerates, the new report makes one thing clear: Europe can’t afford to wait. The question isn’t whether AI will reshape the economy—it’s whether Europe can build enough capacity to play a meaningful role in that transformation.