With AI, EU has opportunity to capitalise on digital, says Draghi 

While some digital sectors are likely already “lost”, artificial intelligence still offers Europe an opportunity to capitalise on “future waves of digital innovation”, former Italian prime minister Mario Draghi said in his report on the future of European competitiveness today (9 September).

“Around 70% of foundational AI models have been developed in the US since 2017 and just three US “hyperscalers” account for over 65% of the global as well as of the European cloud market,” Draghi said in his report, presented to the European Commission.

The bloc can lead the way on some AI segments, however, where EU companies still have an opportunity “to carve out a leading position”, he said, flagging Europe’s strength in autonomous robotics, where it commands 22% of worldwide activity, and in AI services, hosting around 17% of activity. 

If AI is integrated vertically into European industry, it will be a critical factor in gaining higher productivity, for example in the pharma, energy and automobile industry, the report said. He warned however, about the failure of innovative digital companies in Europe to scale up and attract finance, which leads to a gap between the EU and the US.

Draghi said that the impact of AI in Europe has so far been labour-enhancing rather than labour-replacing. In EU efforts to match the US in innovation, it should aim to exceed it in providing opportunities for education and lifelong learning, he said. 

Cloud

The report paints a different picture when it comes to the cloud, where, given the dominance of US providers, the largest European cloud operator accounts for just 2% of the EU market. 

Quantum computing is poised to be the next major innovation, but five of the top ten tech companies globally in terms of quantum investment are based in the US and four in China. None are based in the EU, Draghi said.

“It is too late for the EU to try and develop systematic challengers to the major US cloud providers: the investment needs involved are too large and would divert resources away from sectors and companies where the EU’s innovative prospects are better,” he said.

The EU should still ensure that it has a competitive domestic industry that can meet the demand for “sovereign cloud” solutions, by adopting an EU-wide data security policy for collaboration between EU and non-EU cloud providers, allowing access to US hyperscalers’ latest cloud technologies while preserving encryption, security and ring-fenced services for trusted EU providers. 

The report is expected to feed into the plans of the incoming Commission.