Artificial intelligence marks the upcoming industrial evolution.
In a rapidly evolving digital landscape, Europe finds itself significantly behind the USA and China in AI development and investment. This gap, with important consequences for the economy and job market, is largely due to differences in investment scale and the environment for AI development.
The U.S., leading by a large margin in AI innovation, produced 40 notable foundational AI models in 2024 compared to China's 15 and Europe's 3 combined. In terms of investment, the U.S. attracted $109.1 billion in private AI funding in 2024, which is nearly 12 times that of China ($9.3 billion) and about 24 times the amount invested in the U.K., a major European AI player. Europe’s venture capital investment is also far behind, with only $11.5 billion in 2024 versus $95 billion in the U.S.
China keeps pace with the U.S. by government-led strategic programs that deploy AI broadly and rapidly. In contrast, Europe's lag is due to fragmented markets, slower regulatory processes, and a lack of large "homegrown tech giants" to drive innovation and scale. European efforts like the €200 billion InvestAI initiative and planned AI gigafactories aim to build infrastructure and capacity but face challenges from institutional complexity.
The potential impacts on economies and job markets are significant. In the U.S., continued dominance in AI could boost productivity, create high-value jobs, and reinforce its leadership in emerging tech sectors. However, there are concerns about the need for investment in AI infrastructure to sustain the lead. In China, rapid AI adoption can enhance industrial competitiveness and surveillance capabilities, potentially leading to economic gains but also raising geopolitical and ethical questions. Europe, with its slower AI development, risks falling behind in global competitiveness. This could affect job markets by limiting the creation of AI-driven industries and high-skilled jobs, while regulatory caution may protect some jobs in the short term but slow economic transformation overall.
However, Europe’s focus on integrating AI with clean energy and workforce training could yield more sustainable long-term benefits if successful. Tech giants like Alibaba, Baidu, or Tencent can easily invest billions in research and development in China, while companies from the United States have been leading in big data and AI. Europe and Germany are lagging behind compared to the US and China, but there are signs of progress. For instance, Bosch plans to invest 4 billion euros by 2021 in AI development and aims to increase its number of AI experts from 1,000 to 4,000 in the coming years.
Experts estimate that there will be 2.5 million autonomous shuttle buses on the road worldwide by 2026, and the market for robot cars is estimated to be 60 billion dollars. PwC expects AI to generate $1.8 trillion annually in Europe by 2030, accounting for 9.9% of GDP. In North America, the corresponding market is expected to grow to $3.7 trillion by 2030, accounting for 14.5% of GDP. As AI continues to transform industries, from the automotive industry to retail and consumer goods, the race to close the AI gap is on.
Charles-Edouard Bouée, CEO of Roland Berger, believes that AI will determine the success or failure of entire economies. It remains to be seen whether Europe can leverage its unique strengths and overcome regulatory and political fragmentation to boost AI innovation and adoption. The economic and labor outcomes will likely reflect whether Europe can successfully navigate this digital transformation.
The other regions, such as the U.S. and China, are investing heavily in artificial-intelligence (AI) technology and are producing significant numbers of AI models, leaving Europe comparatively behind. For instance, in 2024, the U.S. produced 40 notable AI models compared to China's 15 and Europe's 3 combined.
Europe's lag in AI development is partly due to its fragmented markets and slower regulatory processes, as well as a lack of large "homegrown tech giants" driving AI innovation and scale. In contrast, China's AI advancement is facilitated by government-led strategic programs that accelerate the deployment of AI.
